Calcutta HC: Tax Credit Can’t Be Refused If Cancellation of GSTIN with Retrospective Effect

The Calcutta High Court has remanded the case back to the department, emphasizing that the buyer/petitioner had made the payment for the purchased items and the corresponding tax through a bank transaction, rather than in cash at the time of the transaction. Furthermore, it was noted that the supplier’s name was already registered as a taxable person according to government records.

The bench of Justice Krishna Rao highlighted that the petitioner cannot be deemed to have failed to fulfil any statutory obligations prior to engaging in the transactions in question because proper verification was not carried out. The respondent authorities rejected the petitioner’s claim solely based on the retrospective revocation of the supplier’s registration, disregarding the petitioner’s supporting documents.

As a registered taxable person, the petitioner sought to avail of input tax credit by claiming a supply obtained from a supplier. The petitioner’s ledger account showed a total purchase credit of Rs. 13,04,586 between April 1, 2018, and March 31, 2019. The petitioner submitted a tax invoice cum challan that detailed a purchase from Global Bitumen amounting to Rs. 11,31,513. The debit note, issued for Rs. 1,73,073.00, listed the International Transport Corporation as the transporter. The petitioner conducted the payment to Global Bitumen using their bank account.

The purchaser of goods, the petitioner in this case, challenged the order issued by the respondent authorities. The order denied the petitioner the benefit of input tax credit (ITC) on purchases made from suppliers. Additionally, the petitioner was required to pay GST penalties and interest under the GST Act.

The respondent alleged that the supplier from whom the petitioner claimed to have made the purchases was entirely fictitious and non-existent, and the supplier’s bank accounts were established based on fabricated documents. They argued that there was no supporting documentation for the petitioner’s input tax credit claim.

The petitioner had not verified the legitimacy and identity of the supplier, including their status as a registered taxable person, prior to engaging in the transaction. The supplier’s GST registration was retrospectively cancelled, covering the petitioner’s transaction period.

The petitioner argued that the department had failed to consider the documents. It was evident from the records that the petitioner had purchased the goods from the supplier, arranged for their transportation, and transferred the necessary funds through the bank to the supplier’s account.

The petitioner stated the validity and authenticity of the transactions. The petitioner presented the required documents and made it clear with due diligence and verified all genuineness and identity of the supplier. The supplier’s name appeared as a GST-registered taxable person on the government website, indicating an active and valid registration at the time of the transaction.

The court clarified that there was no collusion between the petitioner and the supplier concerning the transaction.

The respondent was directed to give consideration afresh to the petitioner’s complaint, taking into account the documents presented by the petitioner to substantiate their claim. Following the hearing, the respondent was instructed to dismiss the claim by passing a reasoned and speaking order.