ITC denial confirmed by High Court for non production of details of freight charges, delivery receipts, toll receipts to prove actual physical movement of goods.
In a recent judgment, the Hon’ble Allahabad High Court confirmed the denial of Input Tax Credit (ITC) where dealer could not produce details of freight charges, delivery receipts, toll receipts to establish actual physical movement of goods and genuineness of transportation.
ABCAUS Case Law Citation:
4212 (2024) (08) abcaus.in HC
In the instant case, the assessee had filed a Writ Petition challenging the appellate order passed by the Additional Commissioner Commercial Tax and order denying Input Tax Credit passed by the Deputy Commissioner, Commercial Tax.
The petitioner was a proprietorship firm which was engaged in the business of reselling and purchase of Peanut, Galla and Paddy. The GST authorities issued a show cause notice under Section 74 of the Goods and Service Tax Act, 2017 (the Act) for a quarter for availing wrong input tax credit (ITC).
Being not satisfied with the reply submitted, the GST Officer passed an order denying the credit for the ITC and also levied penalty of equal amount. The appeal of the petitioner against the said order was rejected.
Before the Hon’ble High Court, the petitioner submitted that all the purchase of goods were made through proper invoice, payments were made through banking channel. He further submitted that on the basis that the selling dealer have not shown the said purchases in its returns or not deposited tax, the action cannot be taken against the petitioner.
He also submitted that the input tax credit under the GST regime is being brought with intention to avoid cascading effect and once the tax had been charged on the bill, which was paid by the petitioner through banking channel, the benefit of input tax credit cannot legally be denied.
It was submitted that the petitioner had rightly discharged his liability of tax by paying the tax charged on the bills raised by the selling dealer and if the selling dealer have not deposited the tax so charged from the petitioner, the selling dealer shall be penalized and not the petitioner. That in the event, amount of input tax credit, rightly claimed by the petitioner, was being recovered that would amount to double taxation, which is not the spirit of GST regime.
On the other hand, the Department contended that if one 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 and in the event of such details are not furnished, the benefit of input tax credit cannot be accorded.
The Hon’ble High Court observed that on a combined reading of section 16 and section 74 of UPGST Act 2017 it is evident 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 Hon’ble High Court further observed that in the instant case, the petitioner had 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, further no proof of filing of GSTR 2A had been brought on record, the proceeding had rightly been initiated against the petitioner.
The Hon’ble High Court noted that the Apex Court while considering the pari materia of section 70 of the Karnataka Value Added Tax Act, 2003, held that primarily the 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. Further by submitting tax invoice, e-way bill, GR or payment details is not sufficient.
Further it was noted that the Hon’ble Patna High Court held that the dealer who claims Input Tax Credit has to prove beyond doubt, the actual transaction by furnishing the name and address of selling dealer, details of the vehicle delivering the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. It was also held that to sustain a claim of Input Tax Credit on purchases, the purchasing dealer would have to prove and establish the actual physical movement of the goods and genuineness of transactions, by furnishing the details referred to above and mere production of tax invoices would not be sufficient to claim ITC.
Further, the Hon’ble High Court noted the Bench had dismissed a case and justified the proceedings initiated under Section 74 of U.P.G.S.T. Act as the petitioner thereof failed to discharge its onus to prove and establish beyond doubt actual transaction of physical movement of goods as well as genuineness of transaction. Against the said judgment the petitioner therein preferred a Special Leave to Appeal before the Hon’ble Apex Court, which was dismissed.
Accordingly, the writ petition was dismissed.
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