S.16 UPVAT Act | Invoices, RTGS Details Not Sufficient For Deciding ITC Claim, Transportation Details Must Be Produced: Allahabad High Court

Placing reliance on the judgment of the Supreme Court in State of Karnataka vs. M/s Ecom Gill Coffee Trading Private Limited, the Allahabad High Court has held that input tax credit cannot be granted based solely on invoices and RTGS payment details.

While dealing with Section 70 of the Karnataka Value Added Tax Act, 2003 the Supreme Court in M/s Ecom Gill Coffee Trading Private Limited held that burden to prove that claim for input tax credit and the genuineness of the transaction lies solely on the assesee. The Court held that mere production of invoices and payments made by cheques is not enough to prove that the assesee is entitled to ITC.

“The dealer claiming ITC has to prove beyond doubt the actual transaction which can be proved 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 aforesaid information would be in addition to tax invoices, particulars of payment etc,” held the Apex Court.

Section 16 of Uttar Pradesh Value Added Tax Act, 2008 provides that for claiming exemptions including input tax credit, the burden to prove the facts which are within the special knowledge of the assesee lies upon him. The assessing authority shall presume that no such circumstances exist. Section 70 of KVAT is pari materia to Section 16 of the UPVAT Act.

The question of law raised by Commissioner, Commercial Tax in revision filed before the High Court was whether the appeal by the Department could be dismissed merely based on invoices and bank transactions which have not been proved as bonafide and genuine transactions establishing actual transportation of goods. Further, whether claim of input tax credit of the assesee could be allowed based solely on such tax invoices and bank transactions.

Counsel for the revisionist-Department argued that burden to prove the correctness of ITC claim was upon the assesee under Section 16 of the Uttar Pradesh Value Added Tax Act, 2008. In support of the submission, reliance was placed on M/s Ecom Gill Coffee Trading Private Limited.

Counsel for assesee argued that all documents available with the assesee had been provided to the Department. It was argued that since all work was done for the Government agencies, the purchases could be evaluated by an independent evaluator appointed by the Government.

The Court observed that Tribunal had recorded a specific finding that certain dealers from whom goods had been purchased were not entitled to issue of tax invoices as they were following compounding scheme. Further, it had been recorded that registration of certain dealers had been cancelled. The Court observed that despite recording such findings, the Tribunal had allowed the claim of ITC solely based on the fact that payments were made through RTGS and the assesee had submitted invoices.

Relying on M/s Ecom Gill Coffee Trading Private Limited, the Court held that “mere production of invoices or the payment made by cheques/RTGS is not enough to discharge the burden of proof upon the assessee.”

The Court observed that even though counsel for assesee stated that details of transportation were provided to the tribunal, they are not mentioned in the order of the Tribunal and the first Appellate Authority.

The Court held that the order of the Tribunal was contrary to the judgment of the Apex Court in M/s Ecom Gill Coffee Trading Private Limited and was liable to be set aside.

While setting aside the order, the Court directed the Tribunal to hear the matter afresh allowing the revisionist to produce documents in relation to the transactions including transportation documents and any other relevant document.

Case Title: Commissioner, Commercial Tax v. S/S Soma Enterprises Ltd. [SALES/TRADE TAX REVISION No. - 110 of 2023]

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