TaxTMI 
TaxTMI 
2024 (10) TMI 114
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....Karnataka Goods and Services Act, 2017. The petitioner is also seeking an order to quash the impugned demand letter-1 CTO/ (AUDIT)-3/BGV/2023-24/B-314, dated 15.07.2023 (Annexure-O) and impugned endorsement letter-2 CTO/(AUDIT)-3/BGV/ENDORSEMENT/ 2023-24/B-379, dated 10.08.2023 (Annexure-S) of respondent No.7 as being illegal, arbitrary, extra-legislative and contrary to the order in Order No.09/2019-Central Tax, dated 03.12.2019 issued by respondent No.3 (Annexure-W), instructions in Circular No.132/2/2020, dated 18.03.2020 issued by respondent No.3 (Annexure-X) and Circular GST-01/2020, dated 27.04.2020 issued by respondent No.4 (Annexure-A1). 3. Petitioner is a partnership firm carrying on business of trading in the granite slabs and blocks at Bailhongal, Karnataka State. Petitioner is a registered person under GST Law possessing GST Identification No.GSTIN as 29AAOFM2421R1ZM. Petitioner is said to have purchased certain goods from the supplier, therefore, under Section 16(1) of the Central Goods and Services Tax Act, 2017 and Karnataka Goods and Services Tax Act, 2017 (for short, 'the Act') it entitles a 'registered person' to take credit of the input tax cha....
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....sions of the Act, absolutely no recovery or investigation steps were initiated or taken against the faulted suppliers. Prior to initiating the current demand proceedings for reversal of Input Tax Credit against the petitioner and so also no material evidence was produced to demonstrate that the investigation, demand or recovery actions were initiated against the faulted suppliers. 5. Learned counsel for the petitioner further relies on the press release dated 04.05.2018 issued by the GST Council, which states that only in exceptional situations when the supplier is missing or he closed his business has become insolvent, the authority respondent No.7 could precipitate the matter directly for demand and recovery of the amount from the purchaser namely the petitioner herein. 6. It is the vehement contention of learned counsel for the petitioner that without initiating any process as stated herein above, to trace the supplier or any material with regard to the supplier having defaulted, missing or has become insolvent or closed his business, a demand has been made against the petitioner herein which has been affirmed and the same is questioned by the petitioner before this Court.....
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....t Tax Credit (ITC) under the Act, it is the burden on him under section 155 read with section 16 of the GST Act, to show and the same would lie on such person to show that he is entitled for the Input Tax Credit. Learned Addl. Government Advocate for the respondents also contends that the press release issued by the Central Board of GST Council on 04.05.2018 may not be applicable to the petitioner as a general rule as it comes with exceptions and it will have to be based on the facts and circumstances of each of the case. He further contends that in case of default in payment of tax by the seller, recovery shall be made from the seller. However, reversal of credit from buyer shall also be an option available with the revenue authorities to address exceptional situations like missing dealer, closure of business by the supplier or supplier not having adequate assets, etc.,. 11. In the present case on hand, it is contended that the petitioner has issued four invoices as detailed in the Table-I, but it is noticed that E-Sugam facility was utilized based on the vehicle numbers provided. The details of the vehicle were checked by the RTO website and out of the four vehicles, the detai....
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....n 41 of the GST Act 2017, which has been made by the petitioner and upon making such an availment, audit has been conducted by the Assessment Officer and on verification of records, not being satisfied with the supplier having paid the taxes under section 39 of the Act, issued demand notice to the petitioner. It is relevant to extract section 16 of the Central Goods and Services Tax Act, 2017, which reads as under: Eligibility and condition for taking input tax credit. 16. (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,- (a) XXX (aa) XXX (b) XXX (i) XXX (ii) XXX ....
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....rther contends that the recipient purchaser has made good the tax. He has made good the tax of the supplier against the transaction of the supplier and now is seeking the Input Tax Credit. Whereas it is a case of the department, i.e., revenue, that the so called tax which has been made good by the petitioner purchaser against the transaction has not been remitted to the State Exchequer. Secondly, such tax is not paid, returns also not filed, so also the supplier has not filed the returns as contemplated under the Act and while conducting the audit, the revenue has also unearthed that the vehicle in which the goods were supplied so quoted by the petitioner, has also not been registered before the RTA, i.e., the Road Transport Authority. 19. Therefore, the fundamental principles would be that before the revenue initiates action against the purchaser, like the petitioner, it is incumbent upon the revenue to cause an inquiry with the supplier and if he is available, recover the tax which is not paid, and thereafter only penalize the appellant, if he is otherwise liable. The judgments referred to by the learned counsel for the petitioner are also in the same line wherein it is held b....
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....nt of tax or any claim to input tax under this Act, the burden of proving that any transaction of a dealer is not liable to tax, or any claim to deduction of input tax is correct, shall lie on such dealer. (2) Where a dealer knowingly issues or produces a false tax invoice, credit or debit note, declaration, certificate or other document with a view to support or make any claim that a transaction of sale or purchase effected by him or any other dealer, is not liable to be taxed, or liable to tax at a lower rate, or that a deduction of input tax is available, the prescribed authority shall, on detecting such issue or production, direct the dealer issuing or producing such document to pay as penalty : (a) in the case of first such detection, three times the tax due in respect of such transaction or claim; and (b) in the case of second or subsequent detection, five times the tax due in respect of such transaction or claim. (3) Before issuing any direction for the payment of the penalty under this Section, the prescribed authority shall give to the dealer the opportunity of showing cause in writing against the imposition of such penalty." 9.....
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.... input tax is available, such a dealer is liable to pay the penalty. Therefore, as observed hereinabove, for claiming ITC, genuineness of the transaction and actual physical movement of the goods are the sine qua non and the aforesaid can be proved only by furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. The purchasing dealers have to prove the actual physical movement of the goods, alleged to have been purchased from the respective dealers. If the purchasing dealer/s fails/fail to establish and prove the said important aspect of physical movement of the goods alleged to have been purchased by it/them from the concerned dealers and on which the ITC have been claimed, the Assessing Officer is absolutely justified in rejecting such ITC claim. 11. In the present case, the respective purchasing dealer/s has/have produced either the invoices or payment by cheques to claim ITC. The Assessing Officer has doubted the genuineness of the transactions by giving cogent reasons on the basis of the evidence and mat....
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....there were certain violations/anomalies by the supplier and the dealer with regard to payment of tax returns audit was conducted. By virtue of the judgment in the case of Ecom Gill (supra), it is held that the purchasing dealers have to prove the actual physical movement of the goods unless they have been purchased from their respective dealers and if the respective purchasing dealer fails to establish and prove the important aspect of physical movement of the goods alleged to have been purchased from the concerned dealers on which the ITC has been claimed, the Assessing Officer is absolutely justified in rejecting such ITC claims, though in the present case the petitioner has produced documents to show that there is existence of the supplier and he is continuing his business by virtue of a separate GST number and has also now produced along with a memo photograph showing some of the godowns belonging to the supplier. 24. The fact remains that the goods that was moved and purchased from the supplier to the purchaser, the vehicles in which it was moved have not been traced and those appear to be fraudulent and not registered before the Regional Transport Authority. Therefore, the....
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.... from the purchaser, initiate proceedings against the purchaser in accordance with law and the ITC claimed by the petitioner ought to have paid to the Government by the supplier for having paid the tax to the revenue. Hence the same has been rightly rejected by the Assessing Officer which is confirmed by the appellate authority. Therefore, I do not find any anomaly, illegality or discrepancy in the order passed by the appellate authority confirming the order of the respondent No.7. 27. Learned counsel for the revenue has relied upon the judgment in the case of Malik Traders v. State of UP and Others reported in 2023/AHC/201260, which also dealt with the proceedings under 74 of UP GST Act for wrong availment of input tax credit which is confirmed by the Assessment Officer in the first appeal. In this case also, the Ecom Gill Coffee Trading Private Limited case was referred to by the Hon'ble Apex Court and relying on the same, the petition filed by the petitioner who was the purchaser therein came to be dismissed relying upon the judgment in the case of Ecom Gill Coffee Trading Private Limited which is the other one. 28. Subsequently another judgment is relied of the High C....