Refund of Unutilized ITC Allowed Despite Supplier's Alleged Fake Invoices Under Section 9(2)(g) DVAT Act

The HC allowed the petition for refund of unutilized ITC on export of goods, rejecting the revenue's claim that the refund should be denied due to alleged fake invoices issued by the supplier. The court held that the petitioner cannot be penalized for the supplier's wrongdoing unless it is proven that the petitioner did not receive the goods or failed to pay for them. The burden imposed by Section 9(2)(g) of the DVAT Act on the purchasing dealer to ensure the supplier deposits the tax is onerous, and the petitioner should not be required to anticipate the supplier's default. Consequently, the petitioner was entitled to the refund of ITC on exported goods.

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Issues involved:
The petitioner impugned a common Order-In-Appeal dismissing separate appeals against Order-In-Original, seeking refund of unutilized Input Tax Credit (ITC) amounting to Rs. 72,03,961/-, based on allegations of fake invoices issued by the supplier, M/s Shruti Exports.

Summary:

Issue 1: Tribunal not constituted for petitioner's appeal
The petitioner filed refund applications for ITC, but the Tribunal was not constituted, hindering the petitioner's statutory right to appeal the impugned order.

Issue 2: Rejection of refund applications
The petitioner's refund applications were rejected on suspicion that the supplier issued fake invoices, without conclusive evidence. The Appellate Authority held the case as one of "goodless supply on the strength of fake invoices."

Issue 3: Allegations against supplier and petitioner's defense
Allegations were made against the supplier, M/s Shruti Exports, for issuing fake invoices. The petitioner contended that its purchases were genuine and against legitimate invoices, with the Calcutta High Court directing unblocking of the petitioner's ITC. Respondent no.2 rejected the refund applications based on investigations against the supplier.

Issue 4: Lack of cogent material for rejection
The rejection of refund applications was based on suspicion without concrete evidence. The petitioner had exported goods, paid invoices from a registered dealer, and there were no allegations of non-payment or non-export.

Issue 5: Legal precedent and entitlement to refund
Citing legal precedent, the Court held that the petitioner should be entitled to the refund of ITC on exported goods. The Court directed the respondents to process the petitioner's refund applications promptly, allowing for further action if material is found to support allegations against the supplier.

In conclusion, the Court allowed the petitions, emphasizing the petitioner's entitlement to the refund of ITC on exported goods, highlighting the lack of substantial evidence to reject the applications solely based on suspicions regarding the supplier's actions.

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