The petitioner had purchased goods from one of the suppliers who was a registered dealer at the time of purchase. The said goods were transported by own car of the petitioner. The payment towards said supply was made through RTGS and proof of the same was presented to support the availment of ITC.
Petitioner has filed the captioned petition against the Order under Section 74 of CGST Act, confirming demand of tax along with interest and penalty on the ground that ITC corresponding to purchase made from the supplier whose registration is cancelled is ineligible since tax has not been deposited by supplier.
In order to support its argument, petitioner contended that the supplier was registered at the time of transaction and payment towards such transaction is made through banking channel. Also, petitioner relied upon following judicial precedents among others:
- Allahabad High Court in case of M/s Solvi Enterprises V/s Additional Commissioner Grade II and another
- Calcutta High Court in case of M/s Suncraft Energy PrivateLimited and another vs. The Assistant Commissioner, State Tax
- Madras High Court in case of M/s D.Y. Beathel Enterprises vs. State tax officer
- Madras High Court in case of M/s Pinstar Automotive India Pvt.Ltd. vs Additional Commissioner
- Calcutta High Court in case of M/s LGW Industries Limited & others Vs Union of India & others
Court's view
High court referred to section 16(2)(c) of CGST Act prior to amendment made by Finance Act 2022 considering that the transaction occurred during pre-amendment era. The condition at that point in time provided that subject to the provisions of section 41 or 43A of CGST Act, the tax charged in respect of such supply has been actually paid to the Government. Section 41 of CGST Act (prior to amendment) dealt with claim of ITC and provisional acceptance thereof. Section 43A of CGST Act dealt with procedure for furnishing return and availing ITC.
In light of Section 16(2)(c) condition prior to amendment, HC held that Section 16 has to be read in consonance with Section 41 of the CGST Act. Further, HC highlighted that Section 43A started with a non-obstante clause and provided that every registered person shall, in the return furnished under sub-section (1) of Section 39, verify, validate, modify or delete the details of supplies furnished by the supplier. Thus, the very requirement for availing the benefit of ITC has to be considered in the light of Section 16 read with the unamended provision of Section 41 and the provisions of Section 43A before the same were omitted.
HC held that there is no ambiguity with respect to actual payment of tax by supplier to Government. If the supplier has not deposited the tax, purchaser i.e. petitioner cannot avail the credit.
With respect to Solvi enterprise judgement referred by petitioner, HC held that the provisions of Section 16(2)(c) of CGST Act were not brought to the notice of Court by State Council. However, in case of Shiv Trading, the said issue was dealt with with wherein ITC was denied. Also, in said case, reliance was placed upon the judgment of the ApexApex Court in the casecase of M/s Ecom Gill Coffee Trading Private Limited.
HC also highlighted that the petitioner could not bring any other document before authorities to demonstrate the supplier had supplied goods and deposited tax with the government.ent. Also, with respect to judgements relied upon by the by the petitioner (supra), the the HC held that consideration of the mandatorytory provision of Section 16(2)(c) has not been made. In many cases, the mattertter has been remanded back for fresh adjudication. In view of the above, the writ petition failed and was dismissed.
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