Imp. Rulings; GST - Input Tax Credit.
Index;
Supreme Court (13.03.2023) In The State of Karnataka Vs. M/s Ecom Gill Coffee Trading Private Limited [Civil Appeal No. 230 OF 2023 Arising from SLP(Civil) No. 2572/2022]
HC Madras, Madurai Bench (24.02.2021) in the matter of M/s. D.Y.Beathel Enterprises Vs. The State Tax Officer (Data Cell), [W.P(MD) Nos.2127/2021]
HC Jharkhand (01.05.2020) in the matter of Electrosteel Steels Limited V/s The State of Jharkhand & Ors. [W.P.(T). No. 6324 of 2019]
HC Madras (01.09.2016) in Assistant Commissioner(CT) Broadway Assessment Circle Vs Bhairav Trading Company [reported in 96 VST 315],
HC Madras (22.11.2012) in the case of Jinsasan Distributors Vs Commercial Tax Officer reported in 59 VST 256 ,
Supreme Court (07.02.1996) in State of Maharashtra Vs Suresh Trading Company reported in 1998 109 STC 439.
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1). Supreme Court (13.03.2023) In The State of Karnataka Vs. M/s Ecom Gill Coffee Trading Private Limited [Civil Appeal No. 230 OF 2023 Arising from SLP(Civil) No. 2572/2022] held that;
# 10. Even considering the intent of section 70 of the Act, 2003, it can be seen that the ITC can be claimed only on the genuine transactions of the sale and purchase and even as per section 70(2) if a dealer knowingly issues or produces a false tax invoice, credit or debit note, declaration, certificate or other document with a view to support or make any claim that a transaction of sale or purchase effected by him or any other dealer, is not liable to be taxed, or liable to take at a lower rate, or that a deduction of input tax is available, such a dealer is liable to pay the penalty. Therefore, as observed hereinabove, for claiming ITC, genuineness of the transaction and actual physical movement of the goods are the sine qua non and the aforesaid can be proved only by furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. The purchasing dealers have to prove the actual physical movement of the goods, alleged to have been purchased from the respective dealers. If the purchasing dealer/s fails/fail to establish and prove the said important aspect of physical movement of the goods alleged to have been purchased by it/them from the concerned dealers and on which the ITC have been claimed, the Assessing Officer is absolutely justified in rejecting such ITC claim.
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2). HC Madras, Madurai Bench (24.02.2021) in the matter of M/s. D.Y.Beathel Enterprises Vs. The State Tax Officer (Data Cell), [W.P(MD) Nos.2127/2021] and batch of cases have held that when the seller had collected the tax from the purchasing dealers, the omission on the part of the seller to remit the tax in question must have been viewed very seriously and strict action ought to have been initiated against them.
# 9. At this stage, the learned counsel brought to my notice that the press release issued by the Central Board of GST council on 4.5.2018. In the said press release, it has been mentioned that there shall not be any automatic reversal of input tax credit from the buyer on nonpayment of tax by the seller. In case of 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 the supplier or the supplier not having adequate assets etc.
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3). HC Jharkhand (01.05.2020) in the matter of Electrosteel Steels Limited V/s The State of Jharkhand & Ors. [W.P.(T). No. 6324 of 2019] wherein it was held that the tax amount, realised by the seller, from the customers, which was to be deposited in the Government Exchequer, but that having not been done by the seller and the amount having been utilised for its business purposes, ………, shall certainly amount to criminal misappropriation of the Government money by the Company, and the State Government is entitled to realise the same with the penalty due thereon.
# 22. We however, find force in the submissions of the learned Additional Advocate General that the tax amount, which had been sought to be realised from the petitioner Company, had already been realised by the petitioner Company from the customers which was to be deposited in the Government Exchequer, but that having not been done by the Company and the amount having been utilized for its business purposes, throughout after the years 2011-12 and onwards, shall certainly amount to criminal misappropriation of the Government money by the Company, and the State Government is entitled to realize the same with the penalty due thereon.
# 23. . . . . This Tax liability can very well be treated as the amount of tax already realised by the petitioner Company from its customers, on behalf of the State Government, and not the direct debt of the petitioner Company towards the State Government, in which case the tax liabilities of the petitioner Company, for realising which the impugned garnishee order has been issued, may not come within the definition of "operational debt", as defined in the IB Code.
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4). HC Madras (01.09.2016) in Assistant Commissioner(CT) Broadway Assessment Circle Vs Bhairav Trading Company [reported in 96 VST 315], have clearly held that retrospective cancellation of registration certificate of the selling dealer cannot be reason to deny the benefit of the purchasing dealer.;
# 18. Thus, the Hon'ble Apex Court, dismissed the appeal preferred by State of Maharashtra holding that, whatever be the effect of retrospective cancellation upon the selling dealer, it can have no effect upon any person, who has acted upon the strength of a registration certificate, when such certificate was alive.
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5). HC Madras (22.11.2012) in the case of Jinsasan Distributors Vs Commercial Tax Officer reported in 59 VST 256 , held that;
# 15. In the present case, it is not in dispute that the registration certificates of the selling dealers have been cancelled with retrospective effect and, therefore, to reverse the input tax credit on the plea that registration certificates have been cancelled with retrospective effect cannot be countenanced. Whatever benefits that has accrued to the petitioners based on valid documents in the course of sale and purchase of goods, for which tax has been paid cannot be declined. The transaction that took place when the registration certificates of the selling dealer were in force cannot be denied to the petitioners/assessees on the above plea. This is contrary to the law laid down by the Supreme Court in the above stated case.
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6). Supreme Court (07.02.1996) in State of Maharashtra Vs Suresh Trading Company reported in 1998 109 STC 439, held that;
# 5. In our view, the High Court was right. A purchasing dealer is entitled by law to rely upon the certificate of registration of the selling dealer and to act upon it. Whatever may be the effect of a retrospective cancellation upon the selling dealer, it can have no effect upon any person who has acted upon the strength of a registration certificate when the registration was current. . . . . . .
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