In the case of Hindustan Unilever Limited
Rajasthan HC, in petitions challenging the workability of section 15(3)(b)(ii) of the CGST Act, 2017 due to the absence of a matching mechanism between a supplier’s credit note and the reversal of ITC by recipient/customer, refuses to grant absolute stay of the entire demand raised against HUL and Tata Motors; Opines that while the provision may seem “a harsh provision” by requiring suppliers to provide evidence of ITC reversal by customers w.r.t post sales discount given by supplier, “.. it being a tax statute, one may not jump to the conclusion that the provision suffers from manifest arbitrariness”; Assessees argued that since the matching mechanism u/s 43 was omitted, they’re burdened with an impossible task of producing statutory records of the recipient’s electronic credit ledger for proof of reversal, making the current process manifestly arbitrary; Rejecting the argument, HC clarifies that section 15(3)(b)(ii) nowhere states that for proof of reversal, only particular kind of document is required to be produced; Furthermore, highlighting assessee’s submission that it was able to produce proof in some cases to the satisfaction of the authorities towards seeking reversal of credit, HC remarks “They are all matters for consideration after detailed reply but are not grounds to pass interim order to completely stay demand made against the petitioners”; Further, HC directs the Revenue to devise a mechanism within 8 weeks, to ensure compliance with Section 15(3)(b)(ii), which was originally intended through IT-enabled GST platform, lists the matter for further orders after 8 weeks.