In the present matter the petitioner filed a writ petition before the Hon’ble Allahabad High Court against a show-cause notice and subsequently an order under section 74 of the Goods and Services Tax (GST) Act, 2017 (GST Act), for the months of June, July, August and September 2020–21 for availing wrong ITC. The Revenue authorities contended that the taxpayer has wrongly claimed the ITC by using forged tax invoices, without proving actual physical movement of goods or genuineness of the transaction. In addition, the taxpayer has failed to discharge the burden of proof. The taxpayer was required to give details, i.e., number of the vehicle used for transportation of goods, payment of freight charged, acknowledgement of taking delivery of goods and payment, etc.
The petitioner argued that the tax payer is entitled to ITC as the conditions prescribed under Section 16 have been complied with and that the tax has been charged by the selling dealer. The petitioner is no way in control over the actions of the selling dealer and ITC cannot be denied on the grounds that the selling dealer has not shown the purchases in his returns or deposited the tax.
The Hon’ble High Court dismissed the writ petition filed by the taxpayer on the basis that the petitioner has failed to prove and establish the actual physical movement of goods and genuineness of transactions between the selling dealer and thereby has opened himself to litigation and scrutiny. The Hon’ble High Court relied on the Hon’ble Supreme Court’s judgment in the case of M/s Ecom Gill Coffee Trading Private Limited[1] where the Hon’ble Supreme Court held that the onus lied upon the petitioner to prove the validity of a transaction beyond reasonable doubt in order to be eligible to claim ITC. The Hon’ble High Court also relied upon its own ruling in a similar case of M/s Shiv Trading v State of Uttar Pradesh[2] to strengthen its stance. It laid down the view that mere payments or invoices are not sufficient to discharge the burden of proof.
W&B Comments: The Court reiterated that claiming ITC under Section 16 of the U.P. GST Act requires strict adherence to statutory conditions, similar to previous rulings like State of Karnataka v. M/s Ecom Gill Coffee Trading Pvt. Ltd. However, this judgment further clarifies that merely presenting tax invoices and e-way bills is insufficient; dealers must also provide comprehensive proof of the physical movement of goods. The decision underscores that the burden of proof remains firmly on the dealer, highlighting both the continuity in legal principles and the increasing emphasis on thorough documentation for ITC claims.
This ruling serves as a critical reminder to dealers of the importance of maintaining detailed and complete records to substantiate ITC claims, as the failure to do so can lead to the disallowance of ITC and potential legal hurdles. The High Court’s decision to dismiss the writ petition reinforces the principle that ITC is a statutory concession, not an inherent right, and must be claimed in full compliance with the law.
[1] 2023 (3) TMI 533
[2] Writ Tax No.1421/2022