Case Law Details
Akal Trade Links Vs Assistant Commissioner (ST) (Madras High Court)
ITC Denial for want of LR /Weighment Slips Unsustainable Where Supplier has paid Tax– Madras HC in Akal Trade Links (A New Shield for Taxpayers)
The Madras High Court held that Input Tax Credit (ITC) cannot be denied merely because the recipient failed to produce lorry receipts or weighment slips when other substantive evidence supports the genuineness of the transaction. In the case concerning AY 2018-19, the Department denied ITC alleging that the petitioner had not proved actual movement of goods purchased from a registered supplier. However, the Court noted that the supplier was registered at the relevant time, had filed statutory returns, remitted GST, and the tax invoices contained vehicle details evidencing transport. The Court observed that further examination of the genuineness of supply was necessary and that absence of ancillary transport documents alone could not justify denial of ITC. Accordingly, the impugned order was set aside and the matter remanded for fresh consideration. The petitioner was allowed to furnish additional documents within 15 days, and the authority was directed to pass a reasoned order within three months after granting a personal hearing.
1. Introduction
The Madras High Court in M/s Akal Trade Links v. Assistant Commissioner (ST), Kangeyam Assessment Circle [W.P. No. 20601 of 2023, dated 05.06.2026] has delivered a significant ruling on the scope of Section 16(2) of the CGST Act, 2017. The judgment clarifies that Input Tax Credit cannot be denied on hyper-technical grounds when substantive conditions of tax payment and genuine supply are satisfied.
2. Factual Matrix
For AY 2018-19, the petitioner effected purchases from a registered dealer, M/s Eco-friendly Coco Products, against eight invoices issued between January–August 2018. The supplier’s GSTIN was active at the time of supply, though subsequently cancelled. The Assessing Authority, vide order dated 28.04.2023, confirmed the tax proposal and denied ITC on the ground that the petitioner failed to produce lorry receipts and weighment slips to establish actual movement of goods, thereby not discharging the burden u/s 155 of the CGST Act.
3. Rival Contentions
Department: Placed reliance on Section 16(2)(b) and Section 155 to contend that the burden to prove receipt of goods lies on the recipient. Absence of LR/weighment slips rendered the transaction suspect.
Petitioner: Demonstrated that (a) invoices bore vehicle numbers; (b) supplier had filed GSTR-1/GSTR-3B and remitted tax; (c) e-way bills were not mandatory for the value in question; and (d) mere absence of ancillary transport documents cannot override statutory compliance by the supplier.
4. Ratio Decidendi
The Hon’ble Court held that “further examination with regard to whether the supply was genuine was warranted, especially in light of the fact that the supplier had filed requisite returns under the applicable GST statutes and paid taxes in respect thereof.”
Key principles laid down:
1. Substantive Compliance Prevails: Where the supplier has discharged tax liability and filed returns, ITC to the recipient cannot be denied merely due to non-production of secondary transport documents like LR/weighment slips.
2. Burden of Proof – Not Unlimited: While Section 155 places burden on the recipient, such burden stands discharged if primary documents like tax invoice with vehicle details are available and corroborated by supplier’s return filing.
3. Revenue Cannot Take Contradictory Stands: Having collected tax from the supplier, the Department cannot deny credit to the recipient on the same transaction by alleging non-receipt of goods without concrete evidence.
5. Operative Part
The impugned order dated 28.04.2023 was set aside. The matter was remanded to the respondent for fresh consideration. The petitioner was granted 15 days to submit additional documents, and the respondent was directed to pass a reasoned order within 3 months after granting personal hearing.
6. Compliance SOP for Businesses Post-Akal Trade Links
To derive full benefit of this ruling, taxpayers must maintain a “Minimum ITC Defence File” for each procurement:
1. Tax Invoice with vehicle number mandatorily mentioned.
2. GSTR-2B Screenshot of the month evidencing auto-population of the invoice.
3. E-way Bill where applicable u/r 138.
4. Bank Payment Proof establishing consideration paid.
Absence of LR/Weighment Slip shall no longer be fatal if the above quartet is available.
7. Conclusion
The judgment reiterates the principle that GST is a consumption-based tax and ITC is its core. Procedural infractions cannot defeat substantive rights. By holding that the Department must undertake “further examination” before denying ITC, the Court has shifted the evidentiary balance. Taxpayers must, however, ensure that core documents evidencing tax payment and vehicle details are preserved.
For businesses, this is not a license to be lax with documentation, but a shield against arbitrary denials. As the Court noted, the impugned order “cannot be sustained” when tax has reached the exchequer.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order dated 28.04.2023 confirming the tax proposal in respect of wrongful availment of Input Tax Credit (ITC) is assailed in this writ petition.
2. Learned counsel for the petitioner submits that the tax demand pertains topurchases made by the petitioner from Eco-friendly Coco Products in Assessment Year 2018-2019. He submits that at the time of delivery of goods, the GST registration of the supplier had not been cancelled. He also submits that the supplies are supported by tax invoices containing the details of the vehicle through which goods were transported and delivered to the petitioner. He further submits that the supplier had filed returns reflecting the supplies and that the requisite taxes thereon were paid by the supplier. Therefore, learned counsel submits that the impugned order cannot be sustained.
3. In response, learned Government Counsel appearing on behalf of the respondent submits that the burden of proof in respect of the availment of ITC is statutorily imposed on the person availing ITC under Section 155 of the applicable GST Statutes read with Section 16 thereof. Because the petitioner failed to discharge such burden by providing evidence of the actual movement of goods, he submits that the petitioner’s availment of ITC was held to be unlawful.
4. The impugned order refers to the eight invoices issued by the Eco-friendly Coco Products. These invoices were issued between January 2018 and August 2018. The record shows that the supplier was a registered person during the relevant period, and the registration was cancelled subsequently. The petitioner has included in the paper book, the relevant invoices referred to in the impugned order. Each invoice contains the vehicle number under which the goods were transported. The impugned order records the petitioner’s contention that the supplier arranged the conveyance for the delivery of the goods to the petitioner.
5. In view of the above contention, further examination with regard to whether the supply was genuine was warranted, especially in light of the fact that the supplier had filed requisite returns under the applicable GST statutes and paid taxes in respect thereof. Without undertaking this exercise, and merely on the ground that lorry receipts and weighment slips had not been filed, the tax proposal was confirmed.
6. Taking into account the totality of facts and circumstances, the impugned order cannot be sustained and reconsideration is warranted. Towards that end, the impugned order dated 28.04.2023 is set aside and the matter is remanded to the respondent for reconsideration. The petitioner is permitted to place on record additional documents relating to the supply within 15 days and within 3 months from the date of receipt thereof, fresh order shall be issued after providing a reasonable opportunity of being heard to the petitioner.
7. The Writ Petition is disposed of on the above terms. Consequently, connected Miscellaneous Petitions are closed. There shall be no order as to costs.
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Disclaimer: This article is for informational purposes only and does not constitute legal advice. Stakeholders should refer to the official GSTN Advisory and consult their tax advisor for specific situations.
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