HC Remands GST ITC Dispute, Holds Demand Cannot Be Confirmed Solely Based on Lack of Documents

HC Remands GST ITC Dispute, Holds Demand Cannot Be Confirmed Solely Based on Lack of Document

The Madras High Court allowed a writ petition for statistical purposes in an alleged wrong ITC availment case by remanding it for fresh consideration. The high court held that the tax department cannot confirm a tax demand solely based on a lack of documents, such as lorry receipts and weighment slips; a detailed verification of the transactions should be conducted.

In the present case, the tax authorities had confirmed a tax demand on the petitioner, Akal Trade Links, for alleged wrong availment of the Input Tax Credit (ITC) through an order dated April 28, 2023. The petitioner, being dissatisfied with the aforesaid order, filed a writ petition in the Madras High Court, requesting the court to quash the tax demand order. The case was heard by the Honourable Mr Justice Senthilkumar Ramamoorthy.

During the personal hearing, the petitioner claimed that the impugned tax demand belongs to the purchases made from Eco-friendly Coco Products during the assessment year 2018-2019, and during the time of goods delivery, the supplier’s GST registration was valid. It further claimed that the supplied goods were supported by tax invoices containing vehicle details for transport. Further, the supplier had filed GST returns and paid the applicable taxes, and therefore, the availed ITC was fair as per the law and could not be denied merely on technical grounds.

However, the tax authorities argued that the petitioner had failed to provide evidence of the actual movement of goods under Section 16, read with Section 155 of the GST Act; consequently, the availed ITC by the petitioner was unlawful.

When the court examined the facts of the case, it noted that the tax authorities had not properly verified the genuineness of the transactions in question, especially when invoices and GST returns were available. The court held that the present required a detailed inquiry, and the tax authorities had simply rejected the claim solely based on missing documents. In conclusion, the court quashed the impugned tax demand order and remanded the case back to the tax authorities for fresh consideration.

The court observed that “further examination with regard to whether the supply was genuine was warranted, especially in light of the fact that the supplier had filed requisite returns under the applicable GST statutes and paid taxes in respect thereof. Without undertaking this exercise, and merely on the ground that lorry receipts and weighment slips had not been filed, the tax proposal was confirmed.”

The petitioner has been granted a time limit of 15 days to furnish all the additional documents (if any), and the concerned tax authorities have been directed to pass a fresh order within three months after granting a fair opportunity of hearing to the petitioner. The writ petition was disposed of without costs.