2024 (2) TMI 855 - HC - GST

GST Input Tax Credit Restored: Supplier Registration Cancellation Not Sole Ground for Denying Credit Under Rule 36(4)

HC quashed the assessment order reversing Input Tax Credit (ITC) due to supplier's cancelled GST registration. The court directed the assessing officer to ... Input Tax Credit - genuineness of transaction - reversal of ITC on account of supplier's retrospective cancellation of GST registration - burden of proof of supplier's existence at time of supply - remand for fresh considerationInput Tax Credit - reversal of ITC on account of supplier's retrospective cancellation of GST registration - genuineness of transaction - ITC claimed by the assessee cannot be disallowed solely because the supplier's GST registration was later cancelled with retrospective effect; the assessing officer must examine the genuineness of the transaction on available evidence. - HELD THAT: - The assessment impugned disallowed ITC exclusively on the basis that the supplier's registration had been cancelled retrospectively and held the supplier to be a 'non-existent dealer' without crediting documentary proof produced by the petitioner. The Court observed that where purchases relate to an earlier period (here 2017-2018) the purchaser may be required to prove the supplier's existence at the relevant time and to establish the genuineness of the transaction by producing contemporaneous documents such as tax invoices, e-way bills, transport documents, delivery challans and proof of payment. In the present case the petitioner produced such documents which were not considered; the assessing officer's sole reliance on retrospective cancellation was therefore unsustainable. The determinative legal principle applied is that retrospective cancellation of a supplier's registration, by itself, is not a conclusive basis for disallowing ITC without a fresh, document-based examination of the transaction's genuineness. [Paras 5]Impugned disallowance on the sole ground of retrospective cancellation set aside and matter remanded for consideration of genuineness on available evidence.Remand for fresh consideration - burden of proof of supplier's existence at time of supply - Procedure to be followed on remand: the assessing officer must reconsider the ITC claim by examining all relevant documents and provide a reasonable opportunity to the petitioner before passing a fresh assessment order within a specified period. - HELD THAT: - The Court directed that the assessing officer should not reject the ITC claim solely because of retrospective cancellation of the supplier's registration but must conduct a fresh assessment of genuineness after considering all relevant documents submitted by the petitioner. The petitioner is to be afforded a reasonable opportunity of being heard. A time limit of two months from receipt of the Court's order was imposed for passing the fresh assessment order upon reconsideration. [Paras 6]Assessment quashed and remanded with directions to reconsider on evidence and to pass a fresh order within two months after giving the petitioner an opportunity.Final Conclusion: Writ petition allowed; impugned assessment order quashed and matter remanded for fresh consideration of the genuineness of the transactions on the basis of documentary evidence, with directions to afford the petitioner a reasonable opportunity and to pass a fresh assessment order within two months; no costs. Issues involved: The assessment order reversing Input Tax Credit (ITC) due to cancellation of supplier's GST registration with retrospective effect.Summary:Issue 1: Reversal of Input Tax Credit (ITC) based on supplier's cancelled GST registrationThe petitioner challenged an assessment order reversing the ITC availed, citing the cancellation of the supplier's GST registration with retrospective effect. The petitioner contended that despite providing supporting documents like tax invoices, e-way bills, and proof of payment, the ITC reversal was solely based on the supplier's cancelled registration. The respondent argued that bill trading is common and raised doubts on the existence of the supplier, M/s.Shikhar Technologies.Issue 2: Judicial scrutiny of the impugned orderThe impugned order stated that the petitioner failed to prove the existence of M/s.Shikhar Technologies, labeling them as a non-existent dealer issuing fake invoices. The court noted that the petitioner had submitted relevant documents, which were disregarded during the assessment. The court found the rejection of the petitioner's contentions solely on the supplier's cancelled registration as unsustainable.Issue 3: Court's decision and directionsThe court quashed the assessment order and remanded the matter for reconsideration. The assessing officer was directed to examine all relevant documents to determine the genuineness of the transaction. The court emphasized that the ITC claim should not be rejected based only on the supplier's cancelled registration. A fresh assessment order was to be issued within two months, providing a reasonable opportunity to the petitioner. The writ petition was disposed of with no order as to costs.This summary provides a detailed breakdown of the issues involved in the legal judgment, outlining the arguments presented by both parties and the court's decision and directions regarding the reversal of Input Tax Credit based on the cancellation of the supplier's GST registration.