Madras High Court Ruling in case of L&T ITC Dispute
In a recent development, the Madras High Court has delivered a significant ruling favouring Larsen & Toubro (L&T) by overturning a Goods and Services Tax (GST) order. This decision has brought relief to L&T amidst allegations of discrepancies in Input Tax Credit (ITC) figures between their Goods and Services Tax Returns (GSTR-2A) and GSTR-3B.
L&T had challenged the order in Original dated 30th December 2023, relating to the assessment period of 2017-18. The subsequent rejection of their rectification petition prompted them to take legal action.
The original order, issued on 30th December 2023, followed a series of communications, including an intimation and a subsequent Show Cause Notice (SCN). Despite L&T’s response dated 4th October 2023 addressing the raised issues, the order upheld tax demands based on differences in GSTR-3B and auto-populated GSTR-2A returns, imposition of cess, treatment of scrips, and corporate social responsibility obligations.
During the proceedings, L&T’s legal counsel meticulously addressed each issue raised in the impugned order. They specifically contested the discrepancies between GSTR-3B and GSTR-2A returns, the imposition of cess despite prior payment, treatment of scrips, and taxation concerning corporate social responsibility activities.
One of the key points emphasized during the proceedings was the lack of opportunity to present their case on specific matters, particularly the treatment of scrips. This raised questions about the fairness of the assessment process.
In response, Mr. C. Harsha Raj, Additional Government Pleader representing the Respondent, acknowledged that several issues raised in the SCN were dropped after considering L&T’s response. He highlighted that the SCN encompassed around 26 issues, out of which approximately 21 were dropped based on L&T’s submissions.
Justice Senthilkumar Ramamoorthy, presiding over the Single bench of Madras High Court, noted that out of the total tax liability amounting to approximately Rs. 5.17 crores, a significant portion stemmed from differences between GSTR-3B and GSTR-2A returns.
The high court observed from the intimation issued on 31st May 2023 that the amount shown in the auto-populated GSTR-2A return exceeded the ITC claimed and reported in L&T’s GSTR-3B returns. In such cases, the imposition of GST on the surplus amount shown in the GSTR-2A return appeared prima facie unsustainable.
Regarding the issue of cess, the court considered L&T’s claim that cess had been filed in May 2018, as reflected in the relevant GSTR-3B return. Despite this, the impugned order levied an additional cess obligation.
Addressing the liability concerning scrips, the court highlighted that a Show Cause Notice required L&T to justify why the ITC should not be reversed towards duty credit scrips. However, the impugned order deemed the amount as turnover from scrips without affording L&T an opportunity to explain, rendering the findings on this matter unsustainable.
This ruling by the Madras High Court brings a significant development in the ongoing dispute, providing relief to Larsen & Toubro (L&T) amidst the challenges posed by GST discrepancies.
Also Read: Supreme Court Grants Relief to GST Officials by Quashing Gujarat HC’s Comments
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