The Allahabad High Court has held that the tax invoices, e-way bills are not enough to avail Input Tax Credit (ITC) under Goods and Service Tax (GST).
The bench of Justice Piyush Agrawal has observed that the petitioner has only brought on record the tax invoices, e-way bills, and payment through banking channel, but no such details such as payment of freight charges, acknowledgement of taking delivery of goods, toll receipts and payment thereof has been provided. Thus, in the absence of these documents, the actual physical movement of goods and genuineness of transportation as well as transaction cannot be established and in such circumstances, no proof of filing of GSTR-2A has been brought on record, the proceeding has rightly been initiated against the petitioner.
The petitioner/assessee is a proprietorship firm in the name and style of M/s Anil Rice Mill which is engaged in the business of reselling and purchase of Peanut, Galla and Paddy.
The department issued a show cause notice under Section 74 of the Goods and Service Tax Act, 2017 for the month of June, July, August and September, 2020-21 to the petitioner for availing wrong input tax credit to which the petitioner submitted his reply. But the department was not satisfied from the reply. The department passed the order and imposed the tax upon the petitioner and penalty of equal amount as well, against which the petitioner preferred an appeal, which has also been rejected by the impugned order.
The assessee contended that the petitioner after due purchase of goods through proper invoice, made the payment through banking channel. On the basis that the selling dealer have not shown the purchases in its returns or not deposited tax, the action cannot be taken against the petitioner. Being a purchaser, the petitioner cleared the bill, in which tax was charged, therefore, the benefit of input tax credit cannot legally be denied to the petitioner. The input tax credit under the GST regime is being brought with intention to avoid cascading effect and once the tax has been charged on the bill, which was paid by the petitioner through a banking channel, the benefit of input tax credit cannot legally be denied.
The petitioner contended that he has discharged his liability of tax by paying the tax charged on the bills raised by the selling dealer and if the selling dealer has not deposited the tax so charged from the petitioner, the selling dealer shall be penalised and not the petitioner. In the event, the amount of input tax credit, rightly claimed by the petitioner, is being recovered that would amount to double taxation, which is not the spirit of the GST regime.
The department contended that the proceedings under Section 74 of UPGST Act has rightly been initiated against the petitioner. It has been found on verification that for the month of June, July, August and September, 2020-21, on the basis of forged tax invoices, the benefit of Rs. 20,31,775 as ITC has been availed by the petitioner. The benefit of input tax credit cannot be accorded in the event, non-fulfilment of such conditions as enumerated therein. Without actual physical movement of goods or genuineness of transaction, the input tax credit cannot be availed.
The department argued that if the petitioner wants to avail the ITC, he is duty bound to prove beyond any reasonable doubt and establish that actual transaction took place and merely furnishing the details of tax invoices, e-way bills, GR is not sufficient. The petitioner was required to give details i.e. vehicle number which were used for transportation of goods, payment of freight charged, acknowledgement of taking delivery of goods and payment etc. The petitioner was required to prove and establish beyond doubt the actual physical movement of goods and genuineness of transportation by furnishing details as has already been stated above and in the event that details are not furnished, the benefit of input tax credit cannot be accorded.
The scheme of input tax credit is being introduced with an object to avoid cascading effect of tax. The purchasing dealer can avail the input tax credit on tax paid on its purchase whereas the manufacturer can avail the same on purchase of its raw material used for manufacturing or selling of its final product which will avoid double taxation. The benefit of concession/ITC under the tax statute can be availed only on fulfilment of certain conditions or restrictions as stipulated under the GST Act. In the event of breach of any of the conditions as enumerated under the Act, no benefit can be conferred to the dealer.
As per Section 16 of the GST Act, every registered dealer can claim the benefit of input tax credit only on fulfilment of certain conditions as enumerated under the Act. Section 16 (2) provides that no registered dealer shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless the conditions mentioned therein are fulfilled. In other words, Section 16 specifically provides the registered dealer to fulfil the conditions as provided therein for availment of input tax credit.
Section 74 of UP GST Act states that determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts empowers to issue notice that tax has not been paid or short paid or erroneously refunded or input tax credit has wrongly been availed or utilised by any reason or wilful misstatement or suppression of fact. Upon adjudication the assessee is required to show cause as to why he should not pay the amount specified in the notice along with interest payable and a penalty equivalent to the tax specified in the notice.
The court held that in the event of wrong availment of input tax credit, the proceedings can be initiated against the registered person or registered dealer but at the same time, restrictions has been imposed upon the authorities that without putting notice to the dealer, no adjudication proceeding can be initiated.
The court while dismissing the petition held that primarily burden of proof for claiming the input tax credit is upon the dealer to furnish the details of selling dealer, vehicle number, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. to prove and establish the actual physical movement of the goods. Submitting a tax invoice, e-way bill, GR or payment details is not sufficient.
Case Title: M/S Anil Rice Mill Versus State Of U.P. And 2 Others
Case No.: WRIT TAX No. – 886 of 2023
Date: 14.08.2024
Counsel For Petitioner: Pranjal Shukla
Counsel For Respondent: Ravi Shanker Pandey
