The Bombay High Court quashed the show cause notice issued to Tikona Infinet Private Limited, which alleged wrongful availing of ITC due to non-electronic filing of Form GST ITC-02. The Court found that the non-availability of the electronic filing functionality during the relevant period excused Tikona's manual submission of the form. The Court invoked the maxim "Lex non cogit ad impossibilia" (the law does not compel the impossible) and held that the notice was arbitrary and without jurisdiction.

Acts and Sections Discussed

• Central Goods and Services Tax Act, 2017 (CGST Act)
  • Section 18(3): Transfer of Input Tax Credit (ITC) in case of sale, merger, or transfer of business.
• CGST Rules, 2017
  • Rule 41: Procedure for transfer of ITC upon sale, merger, or transfer of business.

1. Facts

   • Tikona Infinet Pvt. Ltd. (Petitioner) acquired Tikona Digital Networks (TDN) through a Business Transfer Agreement (BTA) in 2017.
   • Due to functionality issues with the GST portal, TDN was unable to file Form GST ITC-02 electronically to transfer its unutilized ITC to Tikona Infinet.
   • The Petitioner manually submitted the necessary details to the jurisdictional authorities.
   • In 2023, Tikona was issued a show cause notice claiming wrongful availment of ITC, solely on the grounds that the form was not filed electronically.

2. Petitioner’s Argument

   • The Petitioner argued that the non-availability of the portal functionality excused the manual submission.
   • Denying ITC on the technicality of electronic filing when the facility was unavailable amounted to arbitrariness.
   • Cited similar cases from Allahabad, Gujarat, and Delhi High Courts, where relief was granted for the same issue.

3. Respondent’s Argument

   • The Respondent admitted that the portal was not functional during the relevant time but insisted that the prescribed form had to be filed electronically as per Rule 41 of the CGST Rules.
   • Argued that Tikona could raise their defenses during the adjudication process following the show cause notice.

1. Introductory Facts (Paras 1-3):
   Tikona challenges a show cause notice related to ITC reversal due to non-electronic filing of Form GST ITC-02, citing technical impossibility in using the GST portal.

2. Petitioner’s Compliance with Manual Submission (Paras 4-7):
   Tikona Infinet and TDN manually filed the ITC transfer form due to the unavailability of electronic submission on the portal. Despite this, a show cause notice was issued six years later.

3. Similar Precedents (Paras 8-10):
   The Petitioner highlighted similar rulings from the Allahabad, Gujarat, and Delhi High Courts, which granted relief for manual submission in light of non-functional portals.

4. Respondent’s Admissions (Paras 9-12):
   The Respondents did not dispute the non-functionality of the portal during the relevant period but insisted that the show cause notice was intra vires and the Petitioner could address the issue through defenses in response.

Ratio Decidendi

1. Doctrine of Impossibility:
   The Court emphasized that the law does not compel the performance of the impossible. Since it was undisputed that the GST portal was not functional during the relevant period, denying ITC based on non-electronic filing was arbitrary and beyond the jurisdiction of the Respondent.
   (Paras 24-27)

2. Precedents in Similar Cases:
   The Court cited similar decisions from other High Courts, which excused manual filings when the electronic systems were unavailable, further strengthening the Petitioner's case.
   (Paras 30-35)

3. Technicality vs. Substantial Compliance:
   The Court ruled that the Petitioner's manual filing complied with the substantial requirements of the law, as the only default was non-electronic filing due to reasons attributable to the Respondent's portal failures.
   (Paras 28-29)

Conclusion

The Court quashed the show cause notice, holding that Tikona Infinet’s manual filing of ITC transfer forms was justified due to the unavailability of the electronic system. The Respondents were directed to process the forms manually and determine whether ITC was legitimately utilized by Tikona.