Transactions between two firms located in same premise.

[Rajesh Kumar]

R Sir/Madam,

Please guide, if two firms are registered at the same premise. So during sale and purchase, no movement of goods required. Now Department raised objection on the said transactions and denying ITC under Section 16 as goods not received from one another.

Eway bill was generated for formality.

[Lav Prajapati]

As per Schedule II para 1 of CGST Act

(a) Transfer of title to goods - Transfer of title to goods, which have been identified in the contract of sale, passes form the seller to the buyer in any manner and on any conditions agreed upon by the parties to the contract of sale. The basic Rule is that the title of goods passes, when the parties intend the same to pass.

According to this department can not denied on the basics of goods not receive, in that case title of goods transfer is consider as a supply of goods

[Sadanand Bulbule]

Dear Sri. Rajesh

In your case ,there was no need to generate E-way bill since it is required for the physical movement of consignment of value Rs. 50000/- and above. Further in Part B of the E-way bill, the details of registration number of the vehicle is essential. How can you justify the generate of E-way bill? This might pop up doubts for the authorities. Anyway try to convince the authorities about the credibility of the transactions.

[Rajesh Kumar]

Sir, eway bills were generated mentioning vehicle numbers.

They are saying non movement of goods on the basis of said vehicles.

According to them , receiving of goods is one of the primary condition to avail ITC under Section 16.

[Charu Tyagi]

Just a query for a your query

1. How can u mention vehicle number when there's no actual movement, on what basis?

2. If title of goods is transferred on the basis of Invoice as mentioned by Lav Prajapati Sir, Goods will be deemed to be received. therefore, Receiving of goods should not be questioned on the basis of impugned E-Way bill issued only, Is there any other fact missing here?

[Padmanathan KV]

Section 16(2)(b) states:

(b) he has received the goods or services or both.

Now, even though there is no 'movement of goods', when the title in goods passes from one firm to other, it shall be 'received' by the other firm and ITC cannot be denied. I.e. In my opinion 'movement of goods' is not a sine qua non for 'receipt of goods'.

Entries in the stock register maintained under section 35 of the Act should be sufficient proof in my opinion. A certificate from CA/CMA, based on the stock records, may also be produced before the officer out of abundant caution. (Since Sec. 155 casts burden of proof on the person claiming ITC).

As pointed by Experts, e-way bill is also not necessary in my opinion.

[KASTURI SETHI]

The generation of E-way bill has created suspicion. in the minds of the officers of the department. There are so many other documentary evidences which can prove genuineness of transactions i.e. Bank transactions in the account of seller and buyer, acknowledgement of taking delivery of goods, purchase invoices, sale invoices etc. in order to discharge burden of proof under Section 155 of the CGST Act.

Regarding the allegation of fraud, suppression of fact etc. with an intent to evade tax, the burden of proof is cast upon the department.

 

[Amit Agrawal]

Once Dept. itself granted registration of two different firms at the same premises, it follows that receipt of goods between these firms can happen without any movement of goods (presuming that goods were lying in the premises at time of sale between these two entities).

In addition, 'receipt' of goods need not be only be physical-receipt but also it can be symbolic / beneficial / held-in-trust. One can delve into 'explanation' given under Section 16 (2) (b) of the CGST Act, 2017 as well as Section 10 (1) (c) of the IGST Act, 2017.

Of-course, creation of "fake" e-way bill/s has made your case suspicious. One should admit the mistake (presumably, by seller) in creating these e-way bills unconditionally but explain your position with various documentary evidences such as stock register, bank statements, ledgers, CA certificate & so-on (along-with affidavit from seller) and defend ITC using all available evidences & legal provisions in support.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Shilpi Jain]

Proving receipt of goods does not require e way bill generation.

The fact of invoice issued, payment made, subsequent usage of the goods for further supply by the recipient firm, should be good enough evidence for proving actual receipt of goods.

[Shilpi Jain]

Presence of an existing business is also a good proof in this regard.

AI Summary

Debate on ITC Denial Under Section 16: No Goods Movement Between Firms at Same Address, E-Way Bills Unnecessary A discussion centered on the Goods and Services Tax (GST) issue involving two firms registered at the same premises, where no physical movement of goods occurred during transactions. The tax department objected, denying Input Tax Credit (ITC) under Section 16 due to the lack of goods movement. Contributors argued that the transfer of title constitutes receipt of goods, thus qualifying for ITC, and suggested that e-way bills were unnecessary. They recommended using stock records, bank transactions, invoices, and CA certificates as proof of genuine transactions, emphasizing that physical movement is not essential for ITC eligibility.