2024 (7) TMI 1378 - HC - GST

Appellate authority must specify required documents when denying ITC claims from cancelled suppliers

Shiva Chemicals & Anr. Versus Assistant Commissioner of Revenue, State Tax Jorasanko and Jorabagan Charge & Ors.

HC allowed writ petition by way of remand regarding inadmissible ITC utilization from cancelled suppliers for September-October 2017 period. Petitioner ... Inadmissible Input Tax Credit (ITC) utilization from cancelled suppliers - this writ petition is confined to the supplies allegedly made by Dhiraj Kumar Sharma to the petitioner no. 1 in respect of the tax period from September 2017 to October 2017 - HELD THAT:- The petitioner no. 1, in the appeal filed therefrom, which is confined to the supplies allegedly effected by Dhiraj Kumar Sharma had disclosed and produced documents which included four inward tax supply invoices mentioned in Table – A of the order, party ledger for the period from 1st April, 2017 to 31st March, 2018, bank statements and copy of the GSTR- 2A. Admittedly, in this case the petitioner no.1’s supplier had filed returns for the relevant tax period. It is also noticed that the relevant e waybills had also been disclosed by the petitioner no.1 which, inter alia, include the name of the transporter. Though the petitioner no. 1 had discharged its initial burden of proof, the appellate authority had, by glossing over the same without indicating the documents required to be disclosed by the petitioner no. 1, arrived at a finding that the petitioner no. 1 is not eligible for ITC. In this context, it may be noted that the finding returned by the appellate authority that the petitioner no.1 is not eligible for ITC in absence of transport and other documents, appears to be verbatim reproduction of the observations made by the adjudicating authority/ proper officer, in the order dated 13th April 2022. The aforesaid order suffers from non-application of mind and is perverse. The appellate authority ought to have indicated and specified as to what other documents the petitioner no.1 was required to be disclosed to establish the genuinity of the transaction. Although, in page 198 of instant writ petition it appears that the appellate authority had recorded that the petitioner no. 1 could not establish that the goods had been moved and had failed to produce and substantiate the same by disclosure of documents like loading expenses, transportation expenses, unloading expenses and other vouchers. The matter is remanded back to the appellate authority. The appellate authority in the facts of the case is directed to reconsider the matter with respect to the issue of movement of goods - Petition allowed by way of remand. Issues:Challenge to order under WBGST/CGST Act, 2017 regarding inadmissible Input Tax Credit (ITC) utilization from cancelled suppliers.Analysis:The writ petition challenged an order under Section 73 of the WBGST/CGST Act, 2017, regarding inadmissible ITC utilization from suppliers whose registration had been cancelled. The petitioner contended that the appellate authority overlooked relevant documents produced during the appeal, including party ledger, tax invoices, bank statements, and GSTR-2A, proving the legitimacy of transactions. The petitioner's supplier had validly filed returns during the relevant period, supporting the ITC claim. However, the appellate authority deemed the petitioner ineligible for ITC due to alleged non-disclosure of transport-related documents.The respondents argued that the burden of proof for ITC eligibility lay with the petitioner, who failed to provide sufficient evidence of goods movement. They claimed the petitioner did not substantiate loading, transportation, and unloading expenses, essential for proving transaction genuineness. The respondents contended that the petitioner's failure to produce crucial documents justified the denial of ITC.The court noted that the petitioner had initially discharged the burden of proof by presenting e-way bills, invoices, bank statements, and GSTR-2A, showing the transaction's authenticity. Despite this, the appellate authority, without specifying necessary documents for disclosure, concluded the petitioner was ineligible for ITC. The court found the appellate authority's decision lacking proper consideration and directed a reconsideration of the matter.The court remanded the case to the appellate authority for a fresh review, emphasizing the importance of verifying the disclosed documents' consistency with the transactions in question. The appellate authority was instructed to decide the appeal promptly, preferably within eight weeks, after ensuring the documents matched the relevant transactions. The petitioner was permitted to submit additional documents if required, and the previous deposit was treated as a pre-deposit for legal purposes. The writ petition was disposed of with no costs awarded, and parties were granted access to a certified copy of the order upon request.