REVERSAL OF INPUT TAX CREDIT – SUNCRAFT ENERGY CASE

[Dr. Sanjiv Agarwal]

For a dealer to be eligible to avail credit of any input tax, the conditions prescribed in Section 16 (2) of the CGST Act, 2017 have to be fulfilled. Section 16(2) commences with a non-obstante clause stating that notwithstanding anything contained in Section 16 no registered person shall be entitled to credit of any input tax in respect of any supply of goods or services or both to him unless-

1. he is in possession of tax invoice or debit note issued by a supplier registered under this Act, or such other taxpaying documents as may be prescribed;
2. he has received the goods or services or both;
3. subject to the provisions of Section 41 or Section 43A, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of such supply; and
4. he has furnished the return under Section 39.

SUNCRAFT ENERGY PRIVATE LIMITED AND ANOTHER VERSUS THE ASSISTANT COMMISSIONER, STATE TAX, BALLYGUNGE CHARGE AND OTHERS - 2023 (8) TMI 174 - CALCUTTA HIGH COURT pertains to availment of input tax credit and matter difference between GSTR 2A and GSTR 3B on account of mis-match on the part of supplier.

It was the case of the appellant that they have fulfilled all the conditions as stipulated under Section 16(2) and they also paid the tax to the supplier and a valid tax invoice has been issued by the fourth respondent for installation and commission services and the appellant had made payment to the fourth respondent within the time stipulated under the provisions of the Act. Thus, grievance of the appellant was that despite having fulfilled all the conditions as has been enumerated under Section 16(2) of the Act, the tax authorities erred in reversing the credit availed and directing the appellant to deposit the tax which has already been paid to the supplier at the time of availing the goods/ services.

The court observed that tax authorities without resorting to any action against the supplier who is the selling dealer has ignored the tax invoices produced by the appellant as well as the bank statement to substantiate that they have paid the price for the goods and services rendered as well as the tax payable there on, the action of the tax authorities was to be branded as arbitrarily. Therefore, before directing the appellant to reverse the input tax credit and remit the same to the government, the tax authorities ought to have taken action against the supplier, the selling dealer and unless and until the first respondent is able to bring out the exceptional case where there has been collusion between the appellant and the supplier or where the supplier is missing or the supplier has closed down its business or the supplier does not have any assets and such other contingencies, straight away the tax authorities were not justified in directing the appellant to reverse the input tax credit availed by them.

The High Court held that buyers who adhere to the conditions specified in Section 16(2) of the Central Goods and Services Tax (CGST) Act and State Goods and Services Tax (SGST) Act of 2017 are entitled to claim Input Tax Credit (ITC) and are not responsible for discrepancies in the GST Return GSTR 2A and GSTR 3B due to the seller’s default. It was held that before directing the appellant to reverse the input tax credit and remit the same to the government, the first respondent (assistant commissioner) ought to have taken action against the fourth respondent the selling dealer and unless and until the first respondent is able to bring out the exceptional case where there has been collusion between the appellant and the fourth respondent (selling dealer) or where the fourth respondent is missing or the fourth respondent has closed down its business or the fourth respondent does not have any assets and such other contingencies, straight away the first respondent was not justified in directing the appellant to reverse the input tax credit availed by them. Therefore, the demand raised on the appellant dated 20.02.2023 was held to be not sustainable.

Before Supreme Court

In THE ASSISTANT COMMISSIONER OF STATE TAX, BALLYGUNJGE CHARGE & ORS.   VERSUS SUNCRAFT ENERGY PRIVATE LIMITED & ORS - 2023 (12) TMI 739 - SC ORDER , the instant special leave petition was filed by revenue authorities against Calcutta High Court judgment.

On appeal to Supreme Court by revenue, having regard to the facts and circumstances of the case(s) and the extent of demand being on the lower side, court was not inclined to interfere in this matter in exercise of powers under Article 136 of the Constitution of India. Though the SLP filed by revenue has been dismissed, such dismissal cannot be said to be on merit and therefore, it does not command any value for the purpose of precedence or judicial discipline.