2023 (10) TMI 947 - HC - GST

Input tax credit wrongful availment requires proof of physical movement; failure leads to sustained tax demand and penalty.

The article addresses wrongful availment of input tax credit, emphasising that ITC is a conditional concession requiring strict compliance; the claimant ... Input tax credit eligibility - conditions under Section 16 - burden of proof for availing ITC - actual physical movement of goods - genuineness of transaction - proceedings under Section 74Input tax credit eligibility - conditions under Section 16 - burden of proof for availing ITC - actual physical movement of goods - genuineness of transaction - Entitlement to input tax credit where petitioner produced tax invoices, e-way bills, GR and bank payments but did not furnish additional particulars of physical movement and delivery. - HELD THAT: - The Court held that entitlement to input tax credit is subject to the conditions and restrictions set out in Section 16 of the U.P. GST Act and that a registered person claiming ITC must satisfy those conditions. Relying on the statutory scheme and the Apex Court's decision in Ecom Gill Coffee Trading Pvt. Ltd., the Court recorded that the burden of proof to establish the correctness of the ITC claim lies upon the purchasing dealer. Mere production of tax invoices, e-way bills, GR and evidence of payment is not sufficient; the purchaser must additionally prove actual physical movement and genuineness of transactions by furnishing particulars such as identity of the selling dealer, vehicle details, freight payments, acknowledgement of delivery and related corroborative material. On the facts, the petitioner did not produce such additional material and therefore failed to discharge the burden required for claiming ITC; accordingly the impugned denial was held to be justified. [Paras 12, 15, 16, 18, 19]Benefit of input tax credit cannot be granted as the petitioner failed to discharge the burden to prove actual physical movement of goods and genuineness of transactions required under Section 16.Proceedings under Section 74 - input tax credit wrongly availed - Validity of initiation and continuation of adjudication proceedings under Section 74 in respect of alleged wrongful availment of input tax credit. - HELD THAT: - The Court extracted and applied Section 74 which empowers initiation of proceedings where input tax credit has been wrongly availed by reason of fraud or wilful misstatement or suppression of facts, and noted the procedural safeguards therein. Having found that the petitioner had not produced the requisite evidence to substantiate the ITC claim, the Court held that initiation of proceedings under Section 74 and the assessment made by the authorities were in accordance with the statutory scheme and permissible in the circumstances of the case. [Paras 13, 14, 15]Proceedings under Section 74 were properly initiated and adjudication was justified given the petitioner's failure to substantiate its ITC claim.Final Conclusion: The writ petition is dismissed and the impugned orders upholding demand for wrongly availed input tax credit are affirmed, the Court finding that the petitioner failed to discharge the burden to prove physical movement and genuineness of transactions and that proceedings under Section 74 were validly initiated. Issues Involved:1. Functionality of GST Tribunal in Uttar Pradesh.2. Legality of the input tax credit (ITC) claim by the petitioner.3. Conditions for availing ITC under the UP GST Act.4. Burden of proof for ITC claims.5. Physical movement and genuineness of goods for ITC.Summary of Judgment:Functionality of GST Tribunal in Uttar Pradesh:The High Court entertained the Writ Tax due to the non-functionality of the GST Tribunal in Uttar Pradesh as per the Gazette notification dated 14.09.2023.Legality of the Input Tax Credit (ITC) Claim by the Petitioner:The petitioner challenged the order dated 04.10.2019 by the Commercial Tax Officer and the subsequent order dated 06.03.2021 by the Additional Commissioner, which demanded Rs. 12,32,148/- for wrong availment of ITC under Section 74 of the UP GST Act.Conditions for Availing ITC under the UP GST Act:The petitioner argued that ITC should not be denied if the selling dealer did not deposit the tax, as the petitioner had paid through banking channels. The petitioner cited judgments from other High Courts to support their claim.Burden of Proof for ITC Claims:The respondent contended that under Section 16 of the UP GST Act, the petitioner must prove beyond reasonable doubt the actual transaction, including physical movement of goods, payment of freight charges, and other details. They relied on the Supreme Court judgment in State of Karnataka Vs. M/s Ecom Gill Coffee Trading Private Limited, which held that the burden of proof lies on the purchasing dealer.Physical Movement and Genuineness of Goods for ITC:The Court noted that the petitioner failed to provide sufficient evidence of the physical movement of goods, such as payment of freight charges, toll receipts, and acknowledgment of delivery. The Court emphasized that mere submission of tax invoices, e-way bills, and payment details is insufficient to claim ITC.Conclusion:The Court dismissed the writ petition, stating that the petitioner failed to prove the actual physical movement of goods and the genuineness of the transaction. The recent Supreme Court judgment in M/s Ecom Gill Coffee Trading Private Limited was deemed applicable, reinforcing that the burden of proof for ITC claims rests with the dealer.