Tax Authority Reverses Input Tax Credit for Food-Grain Dealer Over Allegedly Non-Existent Supplier Despite GST Registration

The HC reviewed a challenge against an Additional Commissioner's order that reversed Input Tax Credit and demanded payment from a food-grains dealer. The petitioner claimed to have made genuine transactions with M/s Shree Trading Company, paying SGST and CGST per invoices, while authorities alleged the supplier was non-existent. Finding that the supplier was registered on the GST portal and noting the petitioner lacked opportunity to respond due to health issues, the Court stayed the order conditional upon 20% deposit of the disputed amount within two weeks. The Court directed filing of counter and rejoinder affidavits before the next hearing.

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Issues:
Challenge to order passed by Additional Commissioner (Grade-2) (Appeals)-Second, Commercial Tax, Ayodhya under UPGST Act due to non-constitution of GST Appellate Tribunal.

Analysis:
The petitioner, a registered dealer of food-grains, oil seeds, etc., challenged an order dated 31.3.2022 by the Additional Commissioner, alleging that the supplier, M/s Shree Trading Company, charged SGST and CGST on transactions but was later deemed non-existent by the Assessing Authority. The petitioner received an ex-parte order reversing Input Tax Credit (ITC) and demanding payment. The petitioner contended genuine transactions with M/s Shree Trading Company, submitting evidence, but the appeal before the Additional Commissioner was decided against the petitioner, leading to the present writ petition.

The petitioner argued that the order was ex-parte due to health reasons, and the appellate authority's finding was contradictory regarding the petitioner's reply submission. The petitioner maintained that SGST and CGST were paid to M/s Shree Trading Company as per invoices. The respondent authority, however, asserted that M/s Shree Trading Company was fake, and the taxes were never paid, justifying the order.

Upon review, the Court found that M/s Shree Trading Company was registered on the GST portal, indicating payment of SGST and CGST by the petitioner. The Court noted the petitioner's lack of opportunity to respond due to health issues, requiring further consideration. The Court directed the respondents to file a counter affidavit within four weeks and allowed a rejoinder affidavit within two weeks. The matter was scheduled for listing in August 2022, with a stay on the order subject to the petitioner depositing 20% of the disputed amount within two weeks of receiving a certified copy of the order.

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