2021 (12) TMI 834 - HC - GST

Input Tax Credit (ITC) - Constitutional validity of section 16(2)(c) of the CGST/WBGST Act - non-deposit of tax in the Government account by the suppliers which have been collected from the petitioners - main contention of the petitioners in these writ petitions are that the transactions in question are genuine and valid by relying upon all the supporting relevant documents required under law - HELD THAT - On perusal of records available, these writ petitions are disposed of by remanding these cases to the respondents concerned to consider afresh the cases of the petitioners on the issue of their entitlement of benefit of input tax credit in question by considering the documents which the petitioners want to rely in support of their claim of genuineness of the transactions in question and shall also consider as to whether payments on purchases in question along with GST were actually paid or not to the suppliers (RTP) and also to consider as to whether the transactions and purchases were made before or after the cancellation of registration of the suppliers and also consider as to compliance of statutory obligation by the petitioners in verification of identity of the suppliers (RTP). If it is found upon considering the relevant documents that all the purchases and transactions in question are genuine and supported by valid documents and transactions in question were made before the cancellation of registration of those suppliers and after taking into consideration the judgments of the Supreme Court and various High Courts which have been referred in this order and in that event the petitioners shall be given the benefit of input tax credit in question. Petition disposed off.

Summary

Issues:
1. Impugned notices refusing input tax credit and imposing penalties.
2. Constitutional validity of section 16(2)(c) of the CGST/WBGST Act.
3. Allegations of fake suppliers and nonexistence of transactions.
4. Denial of input tax credit due to canceled supplier registrations.
5. Petitioners' contention of genuine transactions and compliance with law.
6. Remand of cases for reconsideration of input tax credit entitlement.

Analysis:
1. The petitioners challenged impugned notices denying input tax credit and imposing penalties under the GST Act. The respondents alleged fake suppliers and nonexistence of transactions, leading to denial of input tax credit benefits. The petitioners argued that they verified suppliers' genuineness and made payments through banks, relying on supporting documents available on the GST portal.

2. The constitutional validity of section 16(2)(c) of the CGST/WBGST Act was raised by the petitioners. However, the court found this issue not requiring consideration as the denial of input tax credit was not based on non-deposit of tax by suppliers. The focus was on the genuineness of transactions and compliance with statutory obligations by the petitioners.

3. The respondents contended that suppliers were fake and nonexisting, with canceled registrations. They emphasized the petitioners' failure to verify suppliers' identities before transactions. The denial of input tax credit was also based on the retrospective cancellation of supplier registrations during the transaction period.

4. In response, the petitioners argued that they acted diligently, relying on available government records showing valid supplier registrations during the transaction period. They highlighted payments made through banks and the availability of invoices on the GST portal as evidence of genuine transactions.

5. The court disposed of the writ petitions by remanding the cases to the respondents for a fresh consideration of the petitioners' entitlement to input tax credit. The respondents were directed to evaluate the genuineness of transactions, payment verifications, timing of transactions concerning supplier registration cancellations, and petitioners' compliance with verification obligations.

6. The court instructed the respondents to issue reasoned orders within eight weeks, considering the documents provided by the petitioners and relevant legal precedents cited by both parties. The cases were to be handled in accordance with the law and the court's observations, ensuring effective hearing opportunities for the petitioners.

This judgment addresses the complex issues surrounding input tax credit entitlement, supplier verification, and compliance with statutory obligations under the GST Act. The court's detailed analysis and directions aim to ensure a fair reconsideration of the petitioners' claims, emphasizing the importance of genuine transactions and compliance with legal requirements.