2023 (3) TMI 529 - HC - GST

Refund of the unutilized Input Tax Credit (ITC) - Export of goods - rejection on the ground that the supplier has issued fake invoices - genuineness of the purchase - refund applications were rejected for the reason that it appeared that they are to be part of a supply chain involving fake Input Tax Credit - HELD THAT - There is merit in the petitioner s contention that it is not required to examine the affairs of its supplying dealers. The allegations of any fake credit availed by M/s Shruti Exports cannot be a ground for rejecting the petitioner s refund applications unless it is established that the petitioner has not received the goods or paid for them. In the present case, there is little material to support any such allegations. In ON QUEST MERCHANDISING INDIA PVT. LTD., SUVASINI CHARITABLE TRUST, ARISE INDIA LIMITED, VINAYAK TREXIM, K.R. ANAND, APARICI CERAMICA, ARUN JAIN (HUF) , DAMSON TECHNOLOGIES PVT. LTD., SOLVOCHEM, M/S. MEENU TRADING CO., MAHAN POLYMERS VERSUS GOVERNMENT OF NCT OF DELHI ORS. COMMISSIONER OF TRADE TAXES, DELHI AND ORS. 2017 (10) TMI 1020 - DELHI HIGH COURT , a Coordinate Bench of this Court had held that t he purchasing dealer is being asked to do the impossible, i.e. to anticipate the selling dealer who will not deposit with the Government the tax collected by him from those purchasing dealer and therefore avoid transacting with such selling dealers. Alternatively, what Section 9(2)(g) of the DVAT Act requires the purchasing dealer to do is that after transacting with the selling dealer, somehow ensure that the selling dealer does in fact deposit the tax collected from the purchasing dealer and if the selling dealer fails to do so, undergo the risk of being denied the ITC. Indeed Section 9(2)(g) of the DVAT Act places an onerous burden on a bonafide purchasing dealer. Thus, the petitioner would be entitled to the refund of the ITC on goods that have been exported by it - petition allowed.

Summary

Issues involved:
The petitioner impugned a common Order-In-Appeal dismissing separate appeals against Order-In-Original, seeking refund of unutilized Input Tax Credit (ITC) amounting to Rs. 72,03,961/-, based on allegations of fake invoices issued by the supplier, M/s Shruti Exports.

Summary:

Issue 1: Tribunal not constituted for petitioner's appeal
The petitioner filed refund applications for ITC, but the Tribunal was not constituted, hindering the petitioner's statutory right to appeal the impugned order.

Issue 2: Rejection of refund applications
The petitioner's refund applications were rejected on suspicion that the supplier issued fake invoices, without conclusive evidence. The Appellate Authority held the case as one of "goodless supply on the strength of fake invoices."

Issue 3: Allegations against supplier and petitioner's defense
Allegations were made against the supplier, M/s Shruti Exports, for issuing fake invoices. The petitioner contended that its purchases were genuine and against legitimate invoices, with the Calcutta High Court directing unblocking of the petitioner's ITC. Respondent no.2 rejected the refund applications based on investigations against the supplier.

Issue 4: Lack of cogent material for rejection
The rejection of refund applications was based on suspicion without concrete evidence. The petitioner had exported goods, paid invoices from a registered dealer, and there were no allegations of non-payment or non-export.

Issue 5: Legal precedent and entitlement to refund
Citing legal precedent, the Court held that the petitioner should be entitled to the refund of ITC on exported goods. The Court directed the respondents to process the petitioner's refund applications promptly, allowing for further action if material is found to support allegations against the supplier.

In conclusion, the Court allowed the petitions, emphasizing the petitioner's entitlement to the refund of ITC on exported goods, highlighting the lack of substantial evidence to reject the applications solely based on suspicions regarding the supplier's actions.