Reply To ITC Denial SCN Due to Non-Registration of Additional Place of Business: DRAFT

The Draft Reply To ITC Denial SCN.

FORM GST DRC – 06

[See rule 142(4)]

Reply to the Show Cause Notice

To,

The Office of Deputy Commissioner

……[Mention Address of the officer as per SCN]

Sub: Reply to Show Cause Notice in case of M/s …… (GSTIN: 07……)

Ref: Your Notice dated …. DIN: ……

Respected Sir,

We, M/s [Company Name], engaged in the business of manufacturing/trading/wholesale dealing of [Product/Service], located at [Address], acknowledge receipt of the aforementioned notice.

The notice alleges that we have claimed Input Tax Credit (ITC) on purchases received at our additional place of business, which is not registered under our GST Registration. The specific allegation stated in the notice is as follows:

“You have received goods at your factory/godown, which is considered an additional place of business but is not registered in your GST Registration Certificate. As a result, the ITC claimed on such purchases is disallowed, and you are instructed to reverse the ITC availed on these goods.”

We hereby submit our response to the said notice for your kind consideration. [Further explanation or justification can be added here as per the response strategy.]

With this reply we hereby contest the notice on the following grounds:

A.  Details of the Assessee

B.   FACTS OF THE CASE

Facts of the case

1. The facts mentioned in the notice are correct.

With reference to the above-mentioned notice, we hereby acknowledge that our Principal Place of Business is located at [Address].

We further acknowledge that we have an Additional Place of Business situated at [Address], which is adjacent to our Principal Place of Business. As our business expanded, we began utilizing this additional space as a temporary extensionstarting in November 2021. Subsequently, we officially registered this location as our Additional Place of Businessunder GST in May 2022. Since then, this place has been duly recorded in our GST Registration Certificate.

As per our understanding, the non-registration of an Additional Place of Business is not a valid ground for denying Input Tax Credit (ITC). ITC is not conditionally linked to an Additional Place of Business but rather to GST Registration and proper documentation. We have maintained all required records and complied with GST provisions while availing ITC.

Extracts of Statutory Provisions of the Case 

 SECTION 16: ELIGIBILITY AND CONDITIONS FOR TAKING INPUT TAX CREDIT

(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) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;

(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37;

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

Explanation.- For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services- 

(i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; 

(ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person; 

(ba) the details of input tax credit in respect of the said supply communicated to such registered person under section 38 has not been restricted; 

(c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and 

(d) he has furnished the return under section 39: 

Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment: 

Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be paid by him along with interest payable under section 50, in such manner as may be prescribed: 

Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him to the supplier of the amount towards the value of supply of goods or services or both along with tax payable thereon. 

(3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income tax Act, 1961 (43 of 1961), the input tax credit on the said tax component shall not be allowed. 

(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the 6[thirtieth day of November] following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier. 

Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019. 

3. SECTION 155: BURDEN OF PROOF

Where any person claims that he is eligible for input tax credit under this Act, the burden of proving such claim shall lie on such person. 

4. SECTION 41: AVAILMENT OF INPUT TAX CREDIT

(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to avail the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited to his electronic credit ledger. 

(2) The credit of input tax availed by a registered person under sub-section (1) in respect of such supplies of goods or services or both, the tax payable whereon has not been paid by the supplier, shall be reversed along with applicable interest, by the said person in such manner as may be prescribed: 

Provided that where the said supplier makes payment of the tax payable in respect of the aforesaid supplies, the said registered person may re-avail the amount of credit reversed by him in such manner as may be prescribed. 

5. RULE 36: DOCUMENTARY REQUIREMENTS AND CONDITIONS FOR CALIMING INPUT TAX CREDIT

(1) The input tax credit shall be availed by a registered person, including the Input Service Distributor, on the basis of any of the following documents, namely,- 

(a) an invoice issued by the supplier of goods or services or both in accordance with the provisions of section 31; 

(b) an invoice issued in accordance with the provisions of clause (f) of sub-section (3) of section 31, subject to the payment of tax; 

(c) a debit note issued by a supplier in accordance with the provisions of section 34; 

(d) a bill of entry or any similar document prescribed under the Customs Act, 1962 or rules made thereunder for the assessment of integrated tax on imports; 

(e) an Input Service Distributor invoice or Input Service Distributor credit note or any document issued by an Input Service Distributor in accordance with the provisions of sub-rule (1) of rule 54. 

(2) Input tax credit shall be availed by a registered person only if all the applicable particulars as specified in the provisions of Chapter VI are contained in the said document: 

Provided that if the said document does not contain all the specified particulars but contains the details of the amount of tax charged, description of goods or services, total value of supply of goods or services or both, GSTIN of the supplier and recipient and place of supply in case of inter-State supply, input tax credit may be availed by such registered person. 

(3) No input tax credit shall be availed by a registered person in respect of any tax that has been paid in pursuance of any order where any demand has been confirmed on account of any fraud, willful misstatement or suppression of facts. 

(4) No input tax credit shall be availed by a registered person in respect of invoices or debit notes the details of which are required to be furnished under subsection (1) of section 37 unless,- 

(a) the details of such invoices or debit notes have been furnished by the supplier in the statement of outward supplies in FORM GSTR-1 or using the invoice furnishing facility; and 

(b) the details of 4[input tax credit in respect of] such invoices or debit notes have been communicated to the registered person in FORM GSTR-2B under sub-rule (7) of rule 60. 

6. OTHER IMPORTANT DEFINITIONS

• Section 2 (85): “place of business” includes-

(a) a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, supplies or receives goods or services or both; or

(b) a place where a taxable person maintains his books of account; or

(c) a place where a taxable person is engaged in business through an agent, by whatever name called.

• Section 2 (86) “place of supply” means the place of supply as referred to in Chapter V of the Integrated Goods and Services Tax Act.
• Section 2 (89) “principal place of business” means the place of business specified as the principal place of business in the certificate of registration.

SUBMISSIONS

As per Section 16 of the Indian GST Law, a registered person is entitled to avail Input Tax Credit (ITC) on goods or services used in the course or furtherance of business. The eligibility and conditions for availing ITC include:

1. Possession of a valid Tax Invoice or Debit Note issued by a registered supplier.
2. Receipt of goods or services.
3. Tax payment to the Government by the supplier.
4. Filing of returns under Section 39.
5. Matching of invoice and debit note details in Form GSTR-2B.
6. Payment to the supplier within 180 days to retain ITC eligibility.
7. No ITC if depreciation is claimed on the tax component of capital goods.
8. ITC to be claimed before November 30 of the following financial year or before filing the annual return.

Furthermore, Rule 36 outlines the documentation requirements for availing ITC, including tax invoices, debit notes, customs documents, and credit notes issued by an Input Service Distributor. There is no restriction in these provisions that disallows ITC solely due to the non-registration of an Additional Place of Business (APOB).

Clarification on Additional Place of Business

We acknowledge that our Principal Place of Business is located at [Address] and that we have an Additional Place of Business (APOB) at [Address], which is adjacent to our principal location. Due to business expansion, we started utilizing this additional space as a temporary business premise from November 2021. The same was officially registered as an APOB in May 2022, and since then, it has been part of our GST Registration Certificate.

Compliance with ITC Conditions

We submit that we have fully complied with the conditions under Section 16 read with Rule 36 for availing ITC on purchases made at our Additional Place of Business, as detailed below:

We respectfully submit that there is no legal basis for the denial of ITC on the grounds of non-registration of an Additional Place of Business, as:

ITC is linked to GST Registration and documentation, not the place of receipt of goods.

All statutory conditions under Section 16 and Rule 36 have been met.

The Additional Place of Business is officially registered since May 2022.

There is no explicit provision disallowing ITC for purchases received at an unregistered place of business.

Prayer

It is respectfully submitted that, based on the aforementioned submissions and relevant case laws, we are not liable for the reversal of ITC.

There is no dispute regarding the receipt of goods and/or services and their utilization as Inputs and/or Input Services for providing Taxable Output Supplies. The substantive benefit of Input Tax Credit cannot be denied solely on procedural grounds. This principle emphasizes substance over form, ensuring that businesses are not unfairly penalized for minor procedural lapses. Therefore, our entitlement to ITC should be upheld based on the actual receipt and utilization of Inputs/Input Services, irrespective of any procedural discrepancy in the documentation. Denying substantive benefits due to mere procedural lapses, especially when the underlying claim—the receipt of Inputs/Input Services—is undisputed, would be unjust.

A favorable consideration of this request would not only resolve the present issue but also uphold the broader principle that the tax system should function in the interest of justice and fairness, in alignment with the legislative intent behind GST and ITC provisions.

Furthermore, we have voluntarily obtained registration for the additional place at a later date. Since this delay does not involve any tax evasion, at most, it may be subject to a general penalty under Section 125.

In light of the above, we respectfully request that the Notice be withdrawn. Additionally, we seek the gracious opportunity to present our case through an “Opportunity of Being Heard” before any final order is passed against us.

Thanks & Regards,

For …
Authorized Signatory

Read More: Anticipatory Bail Without FIR Permissible Under GST & Customs Act: Supreme Court