MCLEOD Russel India Limited Vs Union of India (Gauhati High Court)
Think Differently: Input credit is eligible for default of supplier in furnishing GSR-1 return and invoice not reflected on portal based on other documents; Gauhati High Court Protects Bona Fide Buyers Despite Section 16(2)(aa) Restrictions
Background
Since the introduction of GST, Input Tax Credit (ITC) has been a major bone of contention between tax authorities and assessees. Section 16 of the CGST Act, 2017, imposes several conditions for claiming credit. A primary issue arises when a bona fide buyer pays both the input cost and the tax to the supplier, but the supplier fails to file GSTR-1 return under Section 37, resulting in the input credit not being reflected on the portal. There have also been cases where the supplier filed GSTR-1 but failed to deposit the tax via GSTR-3B returns.
Until 31.12.2021, due to technical issues on the portal, it was legally impossible for buyers to ensure that every invoice was reflected in the GSTR-2B report. Consequently, applying the doctrine of impossibility (lex non cogit ad impossibilia), the buyer’s right to credit was upheld in various judgments, including:
- Suncraft Energy Private Limited & Ors. v. The Assistant Commissioner, State Tax (2023) 117 GSTR 78 (Cal), affirmed by the Supreme Court [(2024) 121 GSTR 230].
- Commissioner Trade and Tax, Delhi v. M/s Shanti Kiran India (P) Limited [Civil Appeal No(s). 2042-2047/2015], where the Supreme Court affirmed the Delhi High Court’s decision granting ITC benefit to a registered purchaser who paid taxes in good faith, even if the seller failed to deposit them.
The Present Dispute
