2024 (8) TMI 904 - HC - GST

Validity of ITC - Compliance with conditions under Section 16 of the U.P. GST Act - double taxation - burden to ptove - HELD THAT - Admittedly, the scheme of input tax credit is being introduced with an object to avoid cascading effect of tax. The purchasing dealer can avail the input tax credit on tax paid on its purchase whereas manufacturer can avail the same on purchase of its raw material used for manufacturing or selling of its final product which will avoid double taxation. The benefit of concession / I.T.C. under the tax statute can be availed only on fulfilment of certain conditions or restrictions as stipulated under the Act. In the event of breach of any of the conditions as enumerated under the Act, no benefit can be conferred to the dealer. Section 16 (2) further provides that no registered dealer shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless the conditions mentioned therein is fulfilled. In other words, Section 16 specifically provides the registered dealer to fulfil the conditions as provided therein for availment of input tax credit. In the case in hand, the petitioner has only brought on record the tax invoices, e-way bills, and payment through banking channel, but no such details such as payment of freight charges, acknowledgement of taking delivery of goods, toll receipts and payment thereof has been provided. Thus in the absence of these documents, the actual physical movement of goods and genuineness of transportation as well as transaction cannot be established and in such circumstances, further no proof of filing of GSTR 2 A has been brought on record, the proceeding has rightly been initiated against the petitioner. The Apex Court in the case of State of Karnataka Vs. M/s Ecom Gill Coffee Trading Private Limited 2023 (3) TMI 533 - SUPREME COURT , while considering the pari materia of section 70 of the Karnataka Value Added Tax Act, 2003, where the burden was upon the dealer to prove beyond doubt its claim of exemption and deduction of ITC - In the said judgement Hon ble the Apex Court has held that primarily burden of proof for claiming the input tax credit is upon the dealer to furnish the details of selling dealer, vehicle number, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. to prove and establish the actual physical movement of the goods. Further by submitting tax invoice, e-way bill, GR or payment details is not sufficient. Thus, no interference is called for by this Court in the impugned orders - the writ petition fails and is dismissed.

Summary

Issues Involved:
1. Validity of input tax credit (ITC) claimed by the petitioner.
2. Compliance with conditions under Section 16 of the U.P. GST Act.
3. Proceedings under Section 74 of the U.P. GST Act.
4. Burden of proof for claiming ITC.
5. Relevance of precedents cited by the petitioner.

Issue-wise Detailed Analysis:

1. Validity of Input Tax Credit (ITC) Claimed by the Petitioner:
The petitioner, a proprietorship firm, was engaged in the business of reselling and purchasing Peanut, Galla, and Paddy. The petitioner challenged the orders dated 31.01.2023 and 24.08.2021, which imposed tax and penalty for availing wrong ITC for June, July, August, and September 2020-21. The petitioner argued that ITC was claimed based on proper invoices and payments made through banking channels. However, the court noted that the petitioner failed to provide essential details such as payment of freight charges, acknowledgment of delivery, toll receipts, and proof of physical movement of goods. Thus, the claim of ITC was deemed invalid.

2. Compliance with Conditions under Section 16 of the U.P. GST Act:
Section 16 of the U.P. GST Act outlines the eligibility and conditions for taking ITC. The court emphasized that a registered dealer can claim ITC only upon fulfilling specific conditions, including possession of a tax invoice, receipt of goods or services, and actual payment of tax to the government. The petitioner failed to meet these conditions as mere production of tax invoices and payment details were insufficient. The court reiterated that the benefit of ITC cannot be accorded without fulfilling the stipulated conditions.

3. Proceedings under Section 74 of the U.P. GST Act:
Section 74 deals with the determination of tax not paid, short paid, erroneously refunded, or wrongly availed ITC due to fraud, misstatement, or suppression of facts. The court noted that the proceedings against the petitioner were rightly initiated under Section 74, as the petitioner availed ITC based on forged tax invoices. The court highlighted that the authorities must issue a notice to the dealer before initiating adjudication proceedings, which was followed in this case.

4. Burden of Proof for Claiming ITC:
The court referred to the Apex Court's judgment in State of Karnataka Vs. M/s Ecom Gill Coffee Trading Private Limited, which held that the burden of proving the correctness of ITC lies upon the dealer claiming it. The dealer must provide comprehensive details, including the name and address of the selling dealer, vehicle details, payment of freight charges, acknowledgment of delivery, and tax invoices. The petitioner failed to discharge this burden, as merely producing tax invoices and payment details was insufficient to prove the actual physical movement of goods and genuineness of transactions.

5. Relevance of Precedents Cited by the Petitioner:
The petitioner relied on the judgments in Commissioner of Central Excise Customs & Service Tax Vs. M/s Juhi Alloys Ltd. and M/s LGW Industries Limited & Ors Vs. Union of India & Ors. However, the court found these judgments irrelevant in light of the Apex Court's decision in M/s Ecom Gill Coffee Trading Private Limited and the court's own precedent in M/s Shiv Trading, which emphasized the burden of proof on the dealer to establish the genuineness of transactions and physical movement of goods.

Conclusion:
The court concluded that the petitioner failed to meet the conditions for claiming ITC and did not provide sufficient proof of the actual physical movement of goods. The proceedings under Section 74 were justified, and the burden of proof for claiming ITC was not discharged by the petitioner. Consequently, the writ petition was dismissed, and no interference with the impugned orders was warranted.