Delhi HC: GST Refund Application of Tax Credit Can’t Be Restricted Based on Suspicion

According to the Delhi High Court, requests for Input Tax Credit (ITC) returns cannot be refused based only on suspicion and without any supporting documentation.

The department was given the go-ahead to start processing reimbursement of Rs. 72,03,961/- based on the goods sent by the petitioner by the division bench of Justices Vibhu Bakhru and Amit Mahajan.

In this instance, the petitioner filed a refund application requesting a refund of unabsorbed ITC of Rs. 72.03 lakhs, which was denied by the Commissioner of CGST due to a lack of supporting documents on the GST portal. The supplier who had provided the petitioner’s products reportedly received fake invoices in order to make bogus ITC refund claims, thus the department did not process the refund application. Due to the issuing of fraudulent invoices, the supplier’s ITC return was also denied.

As a result, the supplier filed a writ suit with the Calcutta High Court to get its Electronic Credit Ledger (ECL) unblocked. The plea was approved by the Calcutta High Court, and ECL was unblocked. As a result, the petitioner said that the items she had bought from the putative source were real and accompanied by real invoices. The CGST Commissioner, however, denied the refund request by claiming that these invoices were connected to a supply chain that included bogus ITC.

The petitioner appealed the abovementioned ruling to the Appellate Authority, which ruled that even though the petitioner obtained invoices from the supplier, it could not be determined whether products had been received or not. The Appellate Court determined that this was a case of a goodless supply of false bills.

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According to the Delhi High Court, it is clear from the material provided that the petitioner’s refund requests were rejected solely because the petitioner’s supplier had submitted false invoices. There is no conclusive finding supported by strong evidence that the petitioner’s supplier’s invoices are fakes. There is no question as to whether the petitioner’s supplier has sent bills because such GST invoices are recorded in the AIO system. No allegations have been made that the petitioner neglected to pay the invoices (which contain IGST and Cess). Additionally, there was no assertion that the in-issue goods were not exported overseas.

The court stated that the supplier’s use of bogus credit could not be used to reject the petitioner’s GST ITC refund claim unless it was proven that the petitioner had not received the products or had not paid for them.

The court ordered the agency to begin processing the petitioner’s ITC return. If the supplier fails to deliver products to the petitioner, the authorities may take the appropriate legal action.