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TMI Blog2024 (10) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... TED [ 2023 (3) TMI 533 - SUPREME COURT] , it is held that the purchasing dealers have to prove the actual physical movement of the goods unless they have been purchased from their respective dealers and if the respective purchasing dealer fails to establish and prove the important aspect of physical movement of the goods alleged to have been purchased from the concerned dealers on which the ITC has been claimed, the Assessing Officer is absolutely justified in rejecting such ITC claims, though in the present case the petitioner has produced documents to show that there is existence of the supplier and he is continuing his business by virtue of a separate GST number and has also now produced along with a memo photograph showing some of the godowns belonging to the supplier. The fact remains that the goods that was moved and purchased from the supplier to the purchaser, the vehicles in which it was moved have not been traced and those appear to be fraudulent and not registered before the Regional Transport Authority. Therefore, the provisions of section 16 (2) (c) (d) is squarely applicable to the case on hand. Whether the tax charge in respect of supplier actually has been paid to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by respondent No.3 (Annexure-X) and Circular GST-01/2020, dated 27.04.2020 issued by respondent No.4 (Annexure-A1). 3. Petitioner is a partnership firm carrying on business of trading in the granite slabs and blocks at Bailhongal, Karnataka State. Petitioner is a registered person under GST Law possessing GST Identification No.GSTIN as 29AAOFM2421R1ZM. Petitioner is said to have purchased certain goods from the supplier, therefore, under Section 16(1) of the Central Goods and Services Tax Act, 2017 and Karnataka Goods and Services Tax Act, 2017 (for short, 'the Act') it entitles a 'registered person' to take credit of the input tax charged on any supply of goods or services to him. To take credit of input tax charged on any supply of goods or services to him, therefore petitioner being a partnership firm Trader in granites, slabs and blocks has during the financial year 2017-18 that is (from July-2017 to March-2018) availed credits under Section 16(1) of the Act of GST paid on the purchase made of goods during the financial year 2017-18. In the case of petitioner's, there is also a condition that for availing input tax credit of GST paid, the taxpayer who wish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuations when the supplier is missing or he closed his business has become insolvent, the authority respondent No.7 could precipitate the matter directly for demand and recovery of the amount from the purchaser namely the petitioner herein. 6. It is the vehement contention of learned counsel for the petitioner that without initiating any process as stated herein above, to trace the supplier or any material with regard to the supplier having defaulted, missing or has become insolvent or closed his business, a demand has been made against the petitioner herein which has been affirmed and the same is questioned by the petitioner before this Court. 7. Learned counsel for the petitioner in support of his arguments relies upon the following Judgments as mentioned herein below: (i) In the case of Assistant Commissioner of State Tax v. Suncraft Energy (P) Ltd., [2023] 157 taxmann.com 352. (ii) In the case of Lokenath Construction Private Limited v. Tax/Revenue Government of West Bengal and others MAT No. 2459/2023, dated 02.05.2024 of High Court of Judicature at Calcutta. (iii) In the case of Commissioner of Central Excise, Bangalore v. Brindavan Beverages (P.) Ltd., 2007 taxmann.com 728. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seller, recovery shall be made from the seller. However, reversal of credit from buyer shall also be an option available with the revenue authorities to address exceptional situations like missing dealer, closure of business by the supplier or supplier not having adequate assets, etc.,. 11. In the present case on hand, it is contended that the petitioner has issued four invoices as detailed in the Table-I, but it is noticed that E-Sugam facility was utilized based on the vehicle numbers provided. The details of the vehicle were checked by the RTO website and out of the four vehicles, the details of three vehicles are not available in the RTO website, which clearly indicates that both the petitioner and the suppliers have used fictitious vehicle numbers for generating E-Sugam. Therefore, learned Addl. Government Advocate for the respondents contends that the contentions put forth by the learned counsel for petitioner cannot be accepted and the argument also would not hold water in view of the judgment of the Hon'ble Apex Court in the case of The State of Karnataka v. M/s. Ecom Gill Coffee Trading Private Limited in Civil Appeal No.230 of 2023 (arising from SLP (Civil) No.2572/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,- (a) XXX (aa) XXX (b) XXX (i) XXX (ii) XXX (ba) XXX (c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and (d) xxx. 15. It is also relevant to extract section 155 of the Act of 2017, which reads as under: 155. Where any person claims that he is eligible for input tax credit under this Act, the burden of proving such claim shall lie on such person. 16. It is seen that aggrieved by the assessment order, an appeal came to be preferred by the petitioner, the appellate authority has dismissed the appeal of the petitioner and affirmed the order of the Assessment Officer respondent No.7. The responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iples would be that before the revenue initiates action against the purchaser, like the petitioner, it is incumbent upon the revenue to cause an inquiry with the supplier and if he is available, recover the tax which is not paid, and thereafter only penalize the appellant, if he is otherwise liable. The judgments referred to by the learned counsel for the petitioner are also in the same line wherein it is held by the Hon'ble Division Bench of the Calcutta High Court that without causing inquiry with the supplier penalizing the purchaser is arbitrary, illegal and without jurisdiction. 20. Now the question before this Court is whether the revenue has initiated action against the purchaser petitioner without making any audit clarification with regard to there being any filing of returns by the supplier, filing of tax by the supplier and the whereabouts and the details of the vehicles in which the goods were supplied by the supplier to the purchaser. 21. In a similar situation the Hon'ble Apex Court while dealing with the provisions of section 70 of the Karnataka Value Added Tax Act, which is akin to the KGST and CGST Act as in the case of the State of Karnataka v. Ecom Gill Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; and (b) in the case of second or subsequent detection, five times the tax due in respect of such transaction or claim. (3) Before issuing any direction for the payment of the penalty under this Section, the prescribed authority shall give to the dealer the opportunity of showing cause in writing against the imposition of such penalty. 9.1 Thus, the provisions of Section 70, quoted hereinabove, in its plain terms clearly stipulate that the burden of proving that the ITC claim is correct lies upon the purchasing dealer claiming such ITC. Burden of proof that the ITC claim is correct is squarely upon the assessee who has to discharge the said burden. Merely because the dealer claiming such ITC claims that he is a bona fide purchaser is not enough and sufficient. The burden of proving the correctness of ITC remains upon the dealer claiming such ITC. Such a burden of proof cannot get shifted on the revenue. Mere production of the invoices or the payment made by cheques is not enough and cannot be said to be discharging the burden of proof cast under section 70 of the KVAT Act, 2003. The dealer claiming ITC has to prove beyond doubt the actual transaction which can be proved by furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer is absolutely justified in rejecting such ITC claim. 11. In the present case, the respective purchasing dealer/s has/have produced either the invoices or payment by cheques to claim ITC. The Assessing Officer has doubted the genuineness of the transactions by giving cogent reasons on the basis of the evidence and material on record. In some of the cases, the registration of the selling dealers have been cancelled or even the sale by the concerned dealers has been disputed and/or denied by the concerned dealer. In none of the cases, the concerned purchasing dealers have produced any further supporting material, such as, furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. and therefore it can be said that the concerned purchasing dealers failed to discharge the burden cast upon them under Section 70 of the KVAT Act, 2003. At the cost of repetition, it is observed and held that unless and until the purchasing dealer discharges the burden cast under Section 70 of the KVAT Act, 2003 and proves the genuineness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the supplier. 24. The fact remains that the goods that was moved and purchased from the supplier to the purchaser, the vehicles in which it was moved have not been traced and those appear to be fraudulent and not registered before the Regional Transport Authority. Therefore, the provisions of section 16 (2) (c) (d) is squarely applicable to the case on hand. Whether the tax charge in respect of supplier actually has been paid to the Government, either in cash or through utilization of Input Tax Credit admissible in respect of the said supply would have to be proved by the purchaser as contemplated under section 155 of the Act, which says where any person claims that he is eligible for Input Tax Credit under this Act, the burden of proving such claim shall lie upon such person. 25. Hence, in view of the above discussions and having gone through the judgments of the Division Bench of the High Court of Calcutta, which has not dealt with the judgment of Ecom Gill (supra) as it was not placed before the Court, the matter was decided, but the Hon'ble Apex Court in the case of Ecom Gill (supra) has clearly laid down as to on whom the onus would lie. Onus of proof is on whom and so a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying on the same, the petition filed by the petitioner who was the purchaser therein came to be dismissed relying upon the judgment in the case of Ecom Gill Coffee Trading Private Limited which is the other one. 28. Subsequently another judgment is relied of the High Court of Allahabad in M/s. Shiv Trading v. State of UP and Others, wherein in similar circumstances the petition filed by the petitioner therein came to be dismissed with regard to Input Tax Credit and the appeal was also rejected by the appellate authority which was again questioned before the High Court of Allahabad and in the said case, relying upon the case of Malik Traders stated supra and the Hon'ble Apex Court judgment in the case of Ecom Gill Coffee Trading Private Limited, the petition of the purchaser who was claiming ITC came to be dismissed. Therefore, all these judgments relied by the revenue are squarely applicable to the case on hand. 29. Under the circumstances, when the law has already been laid down by the Hon'ble Apex Court in the case of Ecom Gill Coffee Trading Private Limited stated herein above, the order that is questioned herein is not tainted with any malice, arbitrariness, illegality ..... X X X X Extracts X X X X X X X X Extracts X X X X
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