Writ can not be filed by Supplier to Audit ITC Claim of Recipient if Payment not made to him

Writ can not be filed by Supplier to Audit ITC Claim of Recipient if Payment not made to him

Issue: Whether a writ of mandamus can be issued against tax authorities to take action against a third respondent for allegedly illegally claiming Input Tax Credit (ITC) without making payment, and whether an audit of the third respondent’s books should be directed.

Facts:

• The assessee filed a writ of mandamus against tax authorities.
• The assessee sought action against a third respondent for allegedly illegally claiming ITC of Rs. 40,22,532 without making any payment.
• The assessee also sought a direction for an audit of the third respondent’s books under Sections 65 and 66 of the CGST Act.

Decision:

• The court held that the assessee had a private grievance.
• The court ruled that the appropriate remedy was to lodge a complaint with the competent authority.
• The court found no sufficient grounds to invoke its jurisdiction under Article 226 of the Constitution of India.
• The court dismissed the writ and imposed a cost of ₹50,000 on the assessee, payable to the Delhi State Legal Services Authority.

Key Takeaways:

• This case highlights that a writ of mandamus is not the appropriate remedy for private grievances related to another taxpayer’s ITC claims.
• The court emphasized that taxpayers should utilize the established complaint mechanisms with the competent tax authorities.
• Courts are reluctant to interfere in tax matters under Article 226 unless there are compelling reasons to do so.
• The imposition of costs underscores the importance of filing appropriate and well-founded petitions.
• This decision reinforces the principle that taxpayers cannot use writ petitions to resolve disputes or investigate allegations against other taxpayers, and must use the established complaint mechanisms.