The Calcutta High Court in the case of Suncraft Energy Private Limited and Another versus The Assistant Commissioner, State Tax, Ballygunge Charge And Others vide Order no. MAT 1218 OF 2023 WITH I.A NO. CAN 1 OF 2023 dated 02.08.2023, has ruled that input tax credit (ITC) under GST cannot be denied over a mismatch in GSTR-2A and GSTR-3B without any investigation into the supplier. The ruling provides massive relief to companies facing demand notices on account of non-reporting or non-payment of taxes by the supplier.

Facts:

In this case, the appellant has availed a GST input tax credit for its purchases from a supplier. The ITC was later reversed by the revenue authority due to non-payment of taxes by the supplier, as some of the invoices of the said supplier were not reflected in the GSTR 2A of the appellant for the financial year 2017-18.

Petitioner’s Submission:

1. It was submitted that all the conditions as stipulated u/s 16 of the CGST Act, 2017 for availment of input tax credit has been fulfilled. Further, to substantiate the possession of a valid tax invoice and payment details to the supplier, the tax invoice and the bank statement has been produced.
2. Reference was placed on Press Release dated 18.10.2018, where it was clarified that furnishing of outward details in Form GSTR-1 by the corresponding supplier(s) and the facility to view the same in Form GSTR-2A by the recipient is in the nature of taxpayer facilitation and does not impact the ability of the taxpayer to avail ITC on self-assessment basis in consonance with the provisions of Section 16 of the Act. 
3. Further, reference placed on the Press release dated 04.05.2018, where it was clarified that “there shall not be any automatic reversal of input tax credit from buyer on non-payment of tax by the seller. In caseof default in payment of tax by the seller, recovery shall be made from the seller however, reversal of credit from buyer shall also be an option available with the revenue authorities to address exceptional situations like missing dealer, closure of business by supplier or supplier not having adequate assets etc.”
4. Also, Reliance placed upon the Supreme Court’s judgment in the case of Union of India (UOI) Versus Bharti Airtel Ltd. And Ors. (2022) 4 SCC 328, where it was held that “Form GSTR-2A is only a facilitator for taking a confirm decision while doing such self-assessment. Non-performance or non-operability of Form GSTR-2A or for that matter, other forms will be of no avail because the dispensation stipulated at the relevant time obliged the registered persons to submit return on the basis of such self-assessment in Form GSTR-3B manually on electronic platform.”

Held:

1. It was held that the department without resorting to any action against the supplier of goods and/ or services has ignored the tax invoices produced by the appellant as well as the bank statement to substantiate that they have paid the price for the goods and services rendered as well as the tax payable thereon. Such action is arbitrary in nature.
2. Further, there shall not be any automatic reversal of input tax credit from buyer on non-payment of tax by seller. In case of a default in payment of tax by the seller, recovery shall be made from the seller
3. Also, the Court directed the respondents to proceed against the supplier first and only in exceptional situations like missing dealer, closure of business by supplier or supplier not having adequate assets, etc, the reversal of GST input tax credit from the buyer shall also be an option available with them.

The Hon’ble High Court by putting reliance on the Supreme Court’s previous judgments in Bharti Airtel as well as Arise India Ltd cases, the Calcutta High Court set aside orders of the Assistant Commissioner, State Tax, Ballygaunge, quashed the demand raised by the respondents and allowed the appeal filed by the appellant.

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