The Hon’ble High Court of Calcutta vide its order dated 12.06.2023 in the matter of M/s Gargo Traders Vs. The Joint Commissioner, Commercial Taxes (State Tax) & Ors. in WPA – 1009 of 2022, set aside the orders denying the claim of Input Tax Credit to the Petitioner on the premise that the registration of the supplier was cancelled retrospectively.  The claim was denied without verifying whether at the time of transaction the registration was valid or not, and without taking into consideration the fact that the transaction in question is genuine or not.  It was held by the Hon’ble Court that without verification, it cannot be said that there was failure on the part of the Petitioner in compliance of any obligation required under the statute.

The Petitioner filed the writ petition before the Hon’ble High Court challenging the order passed by Joint Commissioner, State Tax, West Bengal, Siliguri Circle dated 13th April, 2022, wherein the appeal preferred by the petitioner was rejected and the order passed by the Adjudicating Authority was withheld.

Facts of the Case: –

• That the petitioner being the registered taxable person (RTP) claimed credit of input tax against supply made from a supplier. The ledger account of the petitioner shows the total purchase credit was Rs. 13,04,586/-. The petitioner filed a tax invoice cum chalan reflecting a purchase of Rs. 11,31,513.00 from Global Bitumen.  Further, a debit note was also issued in the name of the transporter i.e., the International Transport Corporation for an amount of Rs. 1,73,073.00/-, showing payment to the Global Bitumen from the account of the petitioner through bank.
• That the impugned order, by which the petitioner is aggrieved, the authorities did not allow the petitioner, who is the purchaser of goods in question and refused to grant the benefit of Input Tax Credit (ITC) on purchase from supplier and also asking the petitioner to pay penalty and interest under the relevant provisions of GST Act.
• On inquiry, the respondents came to know that the supplier from whom the petitioner claimed to have purchased the goods in question are all fake and non-existing and the bank accounts opened by the supplier is on the basis of fake document and the claim of the petitioner of Input Tax Credit are not supported by any relevant document.
• It was also alleged by the respondent that the petitioner has not verified the genuineness and identity of the supplier whether is a registered taxable person (RTP) before entering into any transaction with the supplier, as the registration of the supplier in question has already been cancelled with retrospective effect covering the transaction period of the petitioner.

Petitioner’s Submissions: –

• It was submitted, on the behalf of the petitioner relying upon the tax invoice cum challan dated 12th November, 2018, debit note dated 12th November, 2018, e-Way Bill dated 12th November, 2018, transportation bill dated 12th November, 2018 and statement of bank account of HDFC Bank of the petitioner showing the transaction made by the petitioner in favour of the supplier, that the authorities have not considered the said documents. That from the said documents, it is quite evident that the petitioner has purchased the goods from the supplier and had transported the said goods and also transferred the amount through bank in the account of the supplier.
• Further, relying on the unreported judgment of the Principal Bench of this Court in WPA 23512 of 2019 (M/s. LGW Industries Limited & Ors. –vs- Union of India & Ors.) dated 13th December, 2021 and the Judgment reported in 2023 SCC OnLine Del 1412 (Balaji Exim – vs- Commissioner, CGST & Ors.), it was submitted that allegation of fake credit availed by Global Bitumen cannot be a ground for rejecting the petitioner’s refund application unless it is established that the petitioner has not received the goods or paid for them.

On the other hand, it was submitted on the behalf of the respondents that the transaction relied by the petitioner with Global Bitumen is of November, 2018 but the authorities have cancelled the registration of the supplier of the petitioner with effect from 13.10.2018 and the said cancellation has been accepted by the supplier. Further, the judgments relied by the petitioner is distinguishable from the present case as in the present case, the cancellation of the supplier has been given retrospective effect and the supplier has accepted the same and thus the judgment relied by the petitioner is not applicable in the present case.

Held: –

• The Hon’ble Court after considering the submissions made and facts of the case, found that the main contention of the petitioner that the transactions in question are genuine and valid, and relying upon all the supporting relevant documents required under law, the petitioner with due diligence verified the genuineness and identity of the supplier and name of the supplier as registered taxable person. The registration of the supplier at the time of transaction was showing valid on the Government Portal.
• It was found by the Hon’ble Court that admittedly, at the time of transaction, the name of the supplier as registered taxable person was already available with the Government record and the petitioner has paid the amount of purchased articles as well as tax on the same through bank and not in cash.
• Further, it is not the case of the respondents that there is a collusion between the petitioner and supplier with regard to the transaction. Thus, without proper verification, it cannot be said that there was any failure on the part of the petitioner in compliance of any obligation required under the statute before entering into the transactions in question.
• It was found by the Hon’ble Court that the respondent authorities have only taken into consideration, the cancellation of registration of the supplier with retrospective effect and rejected the claim of the petitioner without considering the documents relied by the petitioner.
• Lastly, it was found by the Hon’ble Court that the unreported judgment passed in the case of M/s LGW Industries Limited & Ors. (supra) is squarely applicable in the present case.

The Hon’ble Court with the above findings and observations, disposed of the writ petitioner by setting aside the impugned orders.  The respondent no. 1 was directed to consider the grievance of the petitioner afresh by taking into consideration of the documents which the petitioner intends to rely in support of his claim, and shall dispose of the claim of the petitioner by passing a reasoned and speaking order after giving an opportunity of hearing to the petitioner.