GST Registration Cancellation With Retrospective Effect Can’t Be A Ground To Deny GST ITC To The Buyer: Calcutta High Court

The Calcutta High Court, while noting that at the time of the transaction, the name of the supplier as a registered taxable person was already available with the government record, and the buyer/petitioner had paid the amount of the purchased articles as well as tax through the bank and not in cash, remanded the matter back to the department.

The bench of Justice Krishna Rao has observed that in the absence of proper verification, it cannot be said that there was any failure on the part of the petitioner to comply with any obligation required under the statute before entering into the transactions in question. The respondent authorities only relied on the cancellation of registration of the supplier with retrospective effect to reject the claim of the petitioner without considering the documents relied on by the petitioner.

The petitioner is a registered taxable person and claimed credit for input tax against a supply made from a supplier. As per the ledger account of the petitioner for the period from 01.04.2018 to 31.03.2019, the total purchase credit was Rs. 13,04,586. The petitioner has filed a tax invoice cum challan reflecting a purchase of Rs. 11,31,513 from Global Bitumen. The debit note was issued in the name of the transporter, i.e., the International Transport Corporation, for an amount of Rs. 1,73,073.00. The petitioner has made payment to Global Bitumen from his account through the bank.

The petitioner challenged the order issued by the respondent authorities for not allowing the petitioner, who is the purchaser of goods, and refusing to grant the benefit of input tax credit (ITC) on purchases from suppliers. The petitioner was asked to pay penalties and interest under the GST Act.

The respondents submitted that on inquiry, they came to know that the supplier from whom the petitioner claimed to have purchased the goods is all fake and non-existent, and the bank accounts opened by the supplier are on the basis of fake documents. The claim of the petitioner for input tax credit is not supported by any relevant document. The petitioner has not verified the genuineness and identity of the supplier, whether he is a registered taxable person or not, before entering into any transaction with the supplier. The registration of the supplier in question has already been canceled with retrospective effect, covering the transaction period of the petitioner.

The petitioner contended that the department had not considered the documents, and from the documents, it is crystal clear that the petitioner has purchased the goods from the supplier, transported the goods, and transferred the amount through the bank to the account of the supplier.

The petitioner urged that the transactions be genuine and valid. The petitioner, with due diligence, verified the genuineness and identity of the supplier, and the name of the supplier as a registered taxable person was available at the government portal, showing its registration as valid and existing at the time of the transaction.

The court noted that there was no collusion between the petitioner and supplier with regard to the transaction.

The court directed the respondent to consider the grievance of the petitioner afresh by taking into consideration the documents that the petitioner intends to rely on in support of his claim. The respondent was directed to dispose of the claim by passing a reasoned and speaking order after being given an opportunity to hear.

Case Title: M/s. Gargo Traders Versus The Joint Commissioner, Commercial Taxes

Case No.: WPA 1009 of 2022

Date: 12.06.2023

Counsel For Petitioner: Jagriti Mishra, Subham Gupta, Mrinmoyee Das, Reshab Kumar

Counsel For Respondent: Subir Kumar Saha, Bikramaditya Ghosh

Click Here To Read The Order