BIRLANU LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) Heard Sri Sparsh Bhargava, learned counsel representing Smt.Shireen Sethna Baria, learned counsel for the petitioner; Smt.Bokaro Sapna Reddy, learned Standing Counsel for CBIC and Sri B.Mukherjee, learned counsel representing Sri N.Bhujanga Rao, learned Deputy Solicitor General of India appearing for respondent Nos.1 to 4 and perused the record.

(2.) The present Writ Petition is filed challenging the constitutional validity of Rule 39(1)(a) of the Central Goods and Services Tax Rules 2017 (for short 'CGST Rules'), the Final Audit Report dtd. 22/1/2024 and the consequential show-cause notice dtd. 30/1/2024 proposing a penalty of Rs.8,38,67,332.00 under Sec. 122(1)(ix) of the Central Goods and Services Tax Act, 2017 (for short, 'CGST Act, 2017').

(3.) The petitioner M/s. BirlaNu Limited is registered as an Input Service Distributor (ISD) under the CGST Act. During the audit for the financial years 2017-2018 and 2018-2019, respondent Nos.2 to 4 observed that the petitioner had accumulated Input Tax Credit (ITC) during each Financial Year (for short, 'FY') and distributed the accumulated ITC in the last month (March 2018-2019) instead of distributing it month wise. This, according to the respondent authorities, is contrary to Rule 39(1)(a) of the CGST Rules, which mandates that the credit available for distribution in a month "shall be distributed in the same month". Consequently, a Spot Memo dtd. 7/12/2023 (Annexure-P5) was issued, followed by additional Spot Memo (Annexure-P7) and Final Audit Report (Annexure-P11). A show-cause notice dtd. 30/1/2024 proposing a penalty of Rs.8,38,67,332.00 (Annexure-P14) which according to the petitioner was issued without granting the petitioner adequate opportunity to respond.