2025 (3) TMI 774 - HC - GST

Wrongful availment of excess Input Tax Credit - vires of Section 16 (2) (aa) of the Central Goods and Services Tax Act 2017 - HELD THAT - The fact of the matter is that the Petitioner s name is correctly mentioned in the invoices however the wrong GST number i.e. of the Bombay office has been mentioned. On this issue there is no stand taken by the Department in the counter affidavit. On a direct query being put to the ld. Standing Counsel for the Respondent/Department he fairly admits that no other entity has also claimed at the ITC on these purchases. The only basis for rejecting the ITC is the mention of the Bombay office GSTN instead of the Delhi office GSTN. Substantial loss would be caused to the Petitioner if the credit is not granted for such a small error on behalf of the supplier. The impugned Order in Original dated 28th June 2024 rejecting the ITC is set aside - The Petitioner is permitted to avail of the Input Tax Credit. Conclusion - Minor clerical errors in documentation which do not result in any substantive claim by another entity should not lead to the denial of ITC when the recipient s entitlement is otherwise clear. The petition is partly allowed and is disposed of.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court were:

1. Whether the impugned order dated 28th June 2024, which rejected the Input Tax Credit (ITC) claimed by the Petitioner due to an incorrect GST number on invoices, was valid.

2. Whether the Petitioner was entitled to claim ITC despite the invoices reflecting the incorrect GST number of the Bombay office instead of the Delhi office.

3. The constitutional validity of Section 16 (2) (aa) of the Central Goods and Services Tax Act, 2017, was also challenged, but this issue was contingent upon the resolution of the ITC claim.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Validity of the Impugned Order and Entitlement to ITC

Relevant Legal Framework and Precedents:

The legal framework revolves around the provisions of the Central Goods and Services Tax Act, 2017, particularly Section 16, which governs the conditions and eligibility for claiming ITC. The specific subsection in question, Section 16 (2) (aa), outlines the requirements for availing ITC, including the necessity for accurate documentation.

Court's Interpretation and Reasoning:

The Court examined the circumstances under which the invoices were issued and noted that the only error was the mention of the Bombay GST number instead of the Delhi GST number. The Court recognized that the Petitioner was indeed a Delhi-based company and that the error was on the part of the supplier, Ahlcon Parenterals (India) Limited.

Key Evidence and Findings:

The Court considered the purchase orders and invoices presented by the Petitioner, which clearly demonstrated that the Petitioner was intended to be the recipient of the goods in Delhi. The Standing Counsel for the Respondent admitted that no other entity had claimed ITC on these purchases, reinforcing the Petitioner's position.

Application of Law to Facts:

The Court applied the provisions of the CGST Act and found that the rejection of ITC based solely on the incorrect GST number was disproportionate, especially when no other entity had claimed the credit. The Court emphasized the need to prevent substantial loss to the Petitioner due to a minor clerical error.

Treatment of Competing Arguments:

The Department argued that the incorrect GST number invalidated the ITC claim. However, the Court found this argument unpersuasive given the lack of any competing claims to the ITC and the minor nature of the error.

Conclusions:

The Court concluded that the impugned order rejecting the ITC was unjustified, and the Petitioner was entitled to claim the ITC for the relevant periods despite the clerical error.

Issue 3: Constitutional Validity of Section 16 (2) (aa)

This issue was not pressed further as the Petitioner agreed not to challenge the constitutional validity if the ITC claim was allowed.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:

The Court held that "substantial loss would be caused to the Petitioner if the credit is not granted for such a small error on behalf of the supplier."

Core Principles Established:

The Court established that minor clerical errors in documentation, which do not result in any substantive claim by another entity, should not lead to the denial of ITC when the recipient's entitlement is otherwise clear.

Final Determinations on Each Issue:

The impugned Order in Original dated 28th June 2024 was set aside, and the Petitioner was permitted to avail of the ITC for the specified periods. The challenge to the constitutional validity of Section 16 (2) (aa) was not pursued further.

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