Calcutta HC Quashes Order Refusing Input Tax Credit, Holds Supplier Was A Registered Taxable Person During Transaction

The Calcutta High Court recently in a Writ Petition Appeal set aside the impugned order passed by the Joint Commissioner, State Tax, West Bengal for refusing to grant the benefit of Input Tax Credit (ITC) to the Petitioner who is the purchaser of goods and for asking the Petitioner to pay penalty and interest under the relevant provisions of GST Act. 

The Single Judge Bench of Justice Krishna Rao noted that "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 also observed that the "Respondent authorities only taking into consideration of the cancellation of registration of the supplier with retrospective effect have rejected the claim of the petitioner without considering the documents relied by the petitioner"

Advocates Jagriti Mishra, Subham Gupta, Mrinmoyee Das and Reshab Kumar appeared for the Petitioner while Additional Government Pleader Subir Kumar Saha along with Advocate Bikramaditya Ghosh appeared for the State.

The Petitioner M/s. Gargo Traders submitted that "They being the registered taxable person (RTP) claimed credit of input tax against 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 chalan reflecting a purchase of Rs. 11,31,513.00 from Global Bitumen. The debit note 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 the account of the petitioner through bank."

It was further added that this being the case, Respondent refused to grant the benefit of Input Tax Credit (ITC) on purchase from supplier and also asked the Petitioner to pay penalty and interest under the relevant provisions of GST Act.  

On the other hand, the State submitted that on inquiry, they came to know that the supplier from whom the petitioner claimed to have purchased the goods in question is all fake and non-existing and the bank accounts opened by the supplier are on the basis of the fake document and the claim of the petitioner of Input Tax Credit are not supported by any relevant document. It is the further case of 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. 

Considering the submissions, the High Court noted 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 was available at the Government Portal showing its registration as valid and existing at the time of transaction."

The Court also noted that admittedly at the time of the transaction, the name of the supplier as a registered taxable person was already available with the Government record and observed that "It is not the case of the respondents that there is a collusion between the petitioner and supplier with regard to the transaction. This Court finds that 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."

Accordingly, the Court set aside the impugned orders and directed the Respondents to consider the grievance of the petitioner afresh by taking into consideration the documents which the Petitioner intends to rely on support of his claim.

Cause Title: M/s. Gargo Traders v The Joint Commissioner, Commercial Taxes (State Tax) & Ors. [WPA 1009 of 2022]

Click here to read/download the Order