2024 (1) TMI 1049 - HC - GST

ITC Reversal Overturned: Evidence Review Mandated, Petitioner Granted Chance to Submit Additional Documentation

HC allowed the writ petition challenging ITC reversal. The court quashed the original order due to insufficient consideration of documentary evidence and ... Reversal of Input Tax Credit on account of supplier being non-existent - Obligation to establish genuineness of transaction for claiming Input Tax Credit - Production of invoices, e-way bills and proof of payment as evidentiary basis for Input Tax Credit - Remand for fresh consideration of documentary evidenceReversal of Input Tax Credit on account of supplier being non-existent - Production of invoices, e-way bills and proof of payment as evidentiary basis for Input Tax Credit - The impugned assessment order reversing the petitioner's Input Tax Credit in respect of purchases from M/s. Prince Sales Agency was quashed insofar as it concluded that documents under the Act were not produced and that the supplier was non-existent. - HELD THAT: - The High Court found that the petitioner had produced invoices, e-way bills and bank statements showing payment against the relevant invoices and had relied on its written reply which attached those documents. The assessing officer's conclusion that the taxable person had not produced documents under the Act was therefore unsustainable. The order also recorded a finding that the products dealt with by the petitioner differed from those dealt with by the supplier, but that contention was not raised in the intimation or show cause notice antecedent to the assessment order; holding a substantive finding on that point without prior notice was impermissible. For these reasons the court held that the impugned order failed to duly consider the documentary evidence adduced by the petitioner and could not stand.Impugned order quashed to the extent it reversed the claimed Input Tax Credit and recorded findings without due regard to the documentary evidence and without proper notice.Remand for fresh consideration of documentary evidence - Obligation to establish genuineness of transaction for claiming Input Tax Credit - The matter was remanded to the assessing officer for reconsideration of the claim of Input Tax Credit after giving the petitioner an opportunity to produce or supplement documentary evidence. - HELD THAT: - Having quashed the impugned order, the Court directed that the petitioner be permitted to file any additional documents within ten days of receipt of the order. The assessing officer was required to afford a reasonable opportunity to the petitioner to be heard, to consider the documents on record including any additional material, and to pass a fresh assessment order within four weeks of receipt of those documents. The remand contemplates an adjudicative re-evaluation of the genuineness of the transactions in light of the evidence, leaving the merits to be finally determined by the assessing officer on reassessment.Matter remanded for fresh consideration; petitioner may file additional documents within ten days and assessing officer to pass fresh assessment within four weeks thereafter.Final Conclusion: The writ petition is disposed of by quashing the impugned assessment order insofar as it reversed the Input Tax Credit; the matter is remanded for fresh consideration after receipt of any additional documents within ten days and after affording the petitioner a reasonable opportunity, with a direction to the assessing officer to pass a fresh assessment order within four weeks; no order as to costs. Issues involved:The issues involved in this case are related to the reversal of Input Tax Credit (ITC) availed by the petitioner in respect of purchases made from a non-existent entity, M/s. Prince Sales Agency, based on the cancellation of its GST registration. The key contention is whether the ITC can be reversed due to the subsequent cancellation of the supplier's GST registration.Detailed Summary:Issue 1: Reversal of Input Tax Credit (ITC)The petitioner, a registered person under GST laws, filed a writ petition against the order reversing the ITC availed from M/s. Prince Sales Agency. The petitioner argued that the reversal was unjust as the supplier's GST registration was cancelled retrospectively. The petitioner provided relevant invoices, e-way bills, and bank statements to prove the genuineness of the purchases. The petitioner relied on the judgment in Jinsasan Distributors case to support the argument that ITC cannot be reversed due to the cancellation of the supplier's GST registration. The petitioner also contested the conclusion in the impugned order that documents were not produced as required under Section 16 of the Tamil Nadu Goods and Services Tax Act, 2017.Issue 2: Supplier's GST Registration and Obligation to Establish Transaction GenuinenessThe Government Advocate argued that M/s. Prince Sales Agency had obtained GST registration in 2020 and had a significant turnover in its first year of operation. Referring to the Sahyadri Industries case, it was contended that the petitioner must establish the genuineness of the transactions to claim ITC, as per Section 16(2) of the TNGST Act read with Rule 36. The obligation to produce relevant documents to prove the transaction authenticity was emphasized, suggesting that the petitioner should seek statutory remedy rather than approach the court under Article 226 of the Constitution of India.Judgment:The Division Bench referred to the Supreme Court's decision in the State of Karnataka v. M/s. Ecom Gill Coffee Trading Private Limited, emphasizing the requirement for the assessee to establish the genuineness of transactions to claim ITC. The Court noted that the petitioner had submitted invoice copies, e-way bills, and proof of payment, contradicting the assessing officer's conclusion that documents were not produced. Consequently, the impugned order was quashed for not duly considering the documentary evidence provided by the petitioner. The matter was remanded for reconsideration by the assessing officer, allowing the petitioner to submit additional documents within ten days. The assessing officer was directed to provide a reasonable opportunity to the petitioner and issue a fresh assessment order within four weeks. The writ petition was disposed of without costs, and connected Miscellaneous Petitions were closed.