Recipient’s ITC cannot be denied in case supplier becomes non-existent or his registration cancelled retrospectively

[CA Bimal Jain]

The Calcutta High Court in M/S. GARGO TRADERS VERSUS THE JOINT COMMISSIONER, COMMERCIAL TAXES (STATE TAX) & ORS. - 2023 (6) TMI 533 - CALCUTTA HIGH COURT set aside the order rejecting GST refund claim to the assessee by holding that supplier was registered on common portal when assessee entered into transaction, it was on later date that registration was cancelled from retrospective date and directed the Revenue Department to consider documents submitted by assessee substantiating genuineness of the transaction.

Facts:

M/s. Gargo Traders (“the Petitioner”) is a registered taxable person who has claimed input tax credit (ITC) on the basis of supplies made by M/s. Global Bitumen ("the Supplier”) worth INR 11,31,513/- and debit note raised by M/s. International Transport Corporation ("the Transporter”) of INR 1,73,073/- totaling to INR 13,04,586/- in financial year 2018-19.

The Revenue Department raised the inquiry and came to know that the Petitioner’s supplier is non-existent and his GST registration was cancelled from the back date covering the date of transaction with the Petitioner.

Further alleged that the Petitioner has not verified the genuineness and identity of the Supplier to know whether the Supplier is a registered under GST or not before entering into any transaction with such supplier.

The Revenue Department issued an Order (“the Impugned Order”) refusing to grant the benefit of ITC on purchase from supplier and further levied penalty and interest under the relevant provisions of the Central Goods and Services Tax Act, 2017 (“ the CGST Act”).

Aggrieved by the Impugned Order the Petitioner filed writ before the High Court.

The Petitioner filed supplementary affidavit by enclosing tax invoice cum challan, debit note, e-way bill, transport bill and bank statements, all dated November 12, 2018 to refute the allegation of the Revenue Department.

The Revenue Department contended that the Petitioner entered into a transaction with supplier on November 12, 2018. However, the GST registration of the Supplier was cancelled retrospectively from October 13, 2018 thus, making the transaction invalid and accordingly, refund is inadmissible.

Issue:

Whether the Petitioner would be allowed to avail ITC where the supplier turned non-existent and registration of such supplier was cancelled retrospectively covering the date of transaction with the Petitioner?

Held:

The Calcutta High Court in M/S. GARGO TRADERS VERSUS THE JOINT COMMISSIONER, COMMERCIAL TAXES (STATE TAX) & ORS. - 2023 (6) TMI 533 - CALCUTTA HIGH COURT held as under:

• Observed that, at the time of transaction the name of the Supplier was available with the government record and the Petitioner has paid the amount along with the tax to the Supplier through bank.
• Stated that, the Revenue Department solely on the basis of cancellation of registration of the Supplier with retrospective date rejected the claim, without considering the documents relied by the Petitioner which duly state that there was no failure on the part of the Petitioner in compliance of obligation required under the statute before entering into the transaction.
• Relied upon the judgement of M/S LGW INDUSTRIES LIMITED & ORS. VERSUS UNION OF INDIA & ORS., ANMOL INDUSTRIES LTD. & ANR. VERSUS UNION OF INDIA & ORS., SURYA ALLOY INDUSTRIES LTD. & ANR. VERSUS UNION OF INDIA & ORS., RAJ METAL INDUSTRIES & ANR. VERSUS UNION OF INDIA & ORS. AND VICTORIA GLOBAL & ANR. VERSUS UNION OF INDIA & ORS. - 2021 (12) TMI 834 - CALCUTTA HIGH COURT.
• Held that, the allegation raised by the Revenue Department are not correct for rejecting the Petitioner’s refund application unless it is established that the Petitioner has not received the goods.
• Set aside the Impugned Order and directed the Revenue Department to dispose the claim of the Petitioner by passing speaking Order after giving an opportunity of hearing to the Petitioner.

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