Ashok Kumar Singh Vs Safecon Lifesciences Private Limited (GSTAT Agra)
Summary: The GST Appellate Tribunal, State Bench Agra, dismissed the Revenue’s appeal against the first appellate order allowing input tax credit of ₹3,83,400 to M/s Safecon Lifesciences Private Limited for purchases of ₹21,30,000 made from M/s Neon Pharma Chem against two invoices during November 2019. The proceedings originated from information that the Maharashtra supplier was allegedly fictitious and engaged only in exchanging invoices. Following the taxpayer’s failure to reply to the notice under Section 74, the adjudicating authority demanded tax of ₹3,83,400, an equivalent penalty and interest of ₹53,676. The first appellate authority granted relief, which the Revenue challenged before the Tribunal.
The Revenue argued that the taxpayer had not established actual receipt of goods as required by Section 16(2)(b) of the CGST Act, 2017. It referred to Rule 86A and cited Malik Traders and Ecom Gill Coffee Trading to contend that invoices and banking payments alone were insufficient without evidence of actual movement, vehicle particulars and freight payments. It also objected that additional evidence had been accepted without giving the adjudicating authority an adequate opportunity to examine it. The taxpayer relied on purchase orders, invoices, e-way bills, banking records, books and stock-register entries, consignment documents and vehicle particulars. It further submitted that the supplier had filed returns and paid tax, its cancelled registration had subsequently been restored, and the adjudicating authority had examined the documents and furnished a report dated 12.10.2021.
The Tribunal held that allegations against the supplier could not be considered in isolation from the recipient’s transaction-specific evidence. It found that the documents supported actual purchase and transportation of goods rather than merely procurement of invoices. The restoration of the supplier’s registration remained uncontroverted. The Tribunal also rejected the procedural objection because the documents had been forwarded to the adjudicating authority and its report had been considered by the first appellate authority. On these facts, it declined to apply the cited ratios, upheld the allowance of ITC and dismissed the departmental appeal without costs.
Cases Discussed
- M/s Malik Traders v. State of U.P. and 2 Others — 2023:AHC:201260; Writ Tax No. 1237 of 2021; 18/10/2023 (Allahabad High Court).
- State of Karnataka v. M/s Ecom Gill Coffee Trading Private Limited — Civil Appeal No. 230 of 2023; 13/03/2023 (Supreme Court).
FULL TEXT OF THE ORIGINAL GSTAT JUDGMENT/ORDER
1- The present appeal has been preferred by the Revenue against the order dated 23.11.2022 passed by the Additional Commissioner, Grade-II (Appeals), Agra, in Appeal No. 79/2020, Year 2019-20 for the tax period November 2019, whereby the appeal filed by the respondent-taxpayer against the adjudication order dated 6.08.2020 was allowed and the tax and penalty imposed thereon under section 74 were set aside.
For the sake of convenience, the appellant shall hereinafter be referred to as the “Revenue” and the respondent as the “Taxpayer”.
Facts of the Case
2- The facts, in brief, are that, pursuant to a communication dated 30.01.2020 issued by the Principal Commissioner, Lucknow, the Commissioner, State Tax, vide his letter dated 26.02.2020, informed the concerned authorities that an investigation conducted by the Assistant Commissioner having jurisdiction over M/S Neon Pharma Chem, GSTIN 27AJGPM2901H2ZD , a dealer registered in the State of Maharashtra, had allegedly revealed that the said firm was fictitious or bogus. It was reported that the person present during the investigation had admitted that no actual purchase or sale of goods was being undertaken by the firm and that the firm was merely engaged in the exchange of invoices.
3- After receipt of this information, it was found that the respondent-taxpayer, M/S Safe Con Life Sciences, had made purchases amounting to Rs. 21,30,000/- from the said firm during November 2019 against two tax invoices and had availed input tax credit (ITC) of Rs. 3,83,400/- in respect thereof.
4- On the basis of these findings notice under Section 74 of the SGST/CGST Act, 2017, read with the corresponding provisions of the applicable IGST Act, was issued to the taxpayer. Since no reply was submitted by the taxpayer to the said notice, the adjudicating authority passed an order dated 07.08.2020, creating a demand of tax amounting to Rs. 3,83,400/-, imposing an equivalent penalty of Rs. 3,83,400/-, and levying interest of Rs. 53,676/-.
5- Aggrieved by the said order, the taxpayer preferred an appeal before the Additional Commissioner, Grade-II (Appeals) IInd, State Tax, Agra. Additional Commissioner, Grade-II (Appeals), vide the impugned order dated 13.10.2021, allowed the appeal and set aside the tax demand and penalty imposed upon the taxpayer.
6- Being aggrieved by the relief granted by the first appellate authority, the Revenue has preferred the present appeal before this Tribunal.
Submissions on Behalf of the Revenue
7- Shri Mukesh Kumar, learned authorised departmental representative appearing on behalf of the Revenue, reiterated the grounds of appeal and submitted that the impugned appellate order had been passed without proper appreciation of the facts, the evidence available on record, and the applicable statutory provisions.
8- He also contended that the first appellate authority had erred in allowing input tax credit contrary to the requirements prescribed under Section 16(2)(b) of the CGST Act, 2017. According to him, the taxpayer had availed ITC merely on the strength of tax invoices issued by a bogus supplier, without actual receipt of the goods.
9- Learned departmental representative further submitted that Rule 86A of the CGST Rules, 2017, provides for the restriction on utilisation of input tax credit in specified circumstances where the credit is suspected to have been fraudulently availed or is otherwise ineligible.
10-Reliance was also placed upon the judgment of the Allahabad High Court in Malik Traders v. State of Uttar Pradesh, decided on 18.10.2023, and the decision in State of Karnataka v. M/s Ecom Gill Coffee Trading Private Limited. It was argued that the mere production of invoices, bilty or consignment documents, and proof of payment through banking channels does not, by itself, conclusively establish the genuineness of a transaction. According to the Revenue, the taxpayer was required to establish the actual movement and receipt of goods by furnishing relevant vehicle particulars, transportation records, and evidence regarding payment of freight charges.
11- The authorised representative further contended that the first appellate authority had accepted additional evidence produced by the taxpayer without affording the adjudicating authority an adequate opportunity to examine and controvert the same. It was submitted that such acceptance was contrary to the principles of natural justice.
12- On these grounds, the Revenue prayed that the impugned appellate order be set aside and the demand raised by the adjudicating authority be restored.
Submissions on Behalf of the Taxpayer
13- Shri Uma Kant Agrawal, learned counsel appearing for the taxpayer, opposed the departmental appeal and submitted that the purchases in question were genuine and supported by contemporaneous documentary evidence.
14- Learned Counsel submitted that the taxpayer had produced the purchase orders, tax invoices, e-way bills, payment particulars, and other relevant documents before the first appellate authority. The purchases had duly been recorded in the books of account and stock register of the taxpayer and, according to the taxpayer, were also reflected in the books of account of the supplier. The consideration had been paid to the supplier through banking channels.
15- Learned counsel further submitted that the supplier had filed its GSTR-1 and GSTR-3B returns for the period from October 2019 to March 2020 and had deposited tax in accordance with the applicable provisions. Copies of the relevant credit ledger and challans had also been furnished before the first appellate authority.
16- It was further submitted that the taxpayer had produced consignment documents, vehicle particulars, and other evidence to establish the transportation and actual receipt of the goods. Thus, the transaction was not supported merely by invoices but by a body of documentary evidence demonstrating the genuineness of the purchases.
17- Learned counsel also pointed out that the registration of the supplier, which had allegedly been cancelled pursuant to the investigation relied upon by the Revenue, had subsequently been restored by the supplier’s jurisdictional authority. A copy of the revocation order had been placed before the first appellate authority. It was argued that the restoration of registration, coupled with the documentary evidence of actual purchases, materially undermined the Revenue’s allegation that the supplier was a bogus entity.
18- With regard to the allegation of violation of natural justice, learned counsel submitted that the first appellate authority had forwarded the documents produced by the taxpayer to the adjudicating authority and had called for a report. The adjudicating authority had furnished its report vide his letter dated 12.10.2021, and the same had been referred to in the impugned appellate order. Accordingly, the contention that the Revenue had been denied an opportunity to examine the evidence was stated to be factually incorrect.
19- Learned counsel, therefore, prayed that the impugned order be upheld and the departmental appeal be dismissed.
Discussion and Findings
20-We have heard the authorised representative appearing on behalf of the Revenue and the learned counsel appearing on behalf of the taxpayer. We have also carefully examined the grounds of appeal, the impugned order, and the material available on record.
21- Upon consideration of the rival submissions and the material available on record, the following points arise for determination:
1. Whether the input tax credit availed by the taxpayer in respect of the purchases made from M/s Neon Pharma Chem was liable to be disallowed on the ground that the supplier was allegedly bogus and the actual movement and receipt of goods had not been established.
2. Whether the impugned appellate order allowing input tax credit to the tax payer, calls for any interference by this Tribunal.
22- The principal allegation of the Revenue is that the taxpayer availed input tax credit on the strength of invoices issued by a bogus supplier without actual receipt of goods. The allegation is founded substantially upon the investigation report concerning M/s Neon Pharma Chem and the statement reportedly made by a person present during that investigation.
23- However, the allegation against the supplier, by itself, cannot be considered in isolation from the evidence produced by the recipient-taxpayer concerning the transactions in question. The eligibility of input tax credit must be examined with reference to the applicable statutory conditions and the facts and evidence relating to the particular transactions.
24-In the present case, the taxpayer is stated to have produced purchase orders, tax invoices, e-way bills, payment records, entries in the books of account and stock register, consignment documents, and vehicle particulars before the first appellate authority. The taxpayer also relied upon the supplier’s GST returns and records relating to the payment of tax. These documents were relied upon to establish not merely the issuance of invoices but also the actual purchase, transportation, and receipt of the goods.
25- The material referred to in the impugned order indicates that the taxpayer had furnished documentary evidence relating to the purchases and transportation of goods serve as proof that actual purchase of goods took place, and refutes the allegation that only invoices were procured.
26-An important fact in the present case is that the registration of M/s Neon Pharma Chem, which had allegedly been cancelled on the basis of the investigation relied upon by the Revenue, was subsequently restored by the supplier’s jurisdictional authority. The revocation order was produced before the first appellate authority. The Revenue has not controverted the fact of such restoration in the present proceedings. The revocation of supplier’s registration automatically nullifies any allegation that the supplier is bogus or non-existent.
27-We further note that the first appellate authority did not proceed solely on the basis of the taxpayer’s assertions. The record, as described in the impugned order, indicates that the documents produced by the taxpayer were forwarded to the adjudicating authority and a report was called for. The adjudicating authority submitted its report on 12.10.2021, which was taken into consideration by the first appellate authority. In these circumstances, the contention of the Revenue that the additional evidence was accepted without affording any opportunity to the department does not, on the material placed before us, furnish sufficient ground for setting aside the impugned order.
28- The principle laid down in above quoted ratios established by Hon’ble High Court does not apply in view of facts as discussed here in.
29-In view of the foregoing discussion, and having regard to the facts and circumstances of the present case, we are of the considered opinion that allowance of the input tax credit on the purchases from M/S Neon Pharma Chem is completely justified and Revenue has failed to establish sufficient grounds for interference with the impugned appellate order dated 13.10.2021.Questions raised are thus answered accordingly and in favour of the tax payer.
30- Consequently, this second appeal fails and dismissed as found to be devoid of merit. Order in appeal is upheld.
31- No order as to cost
32- There is no pending interim application.
33- Order pronounced in open court on this 16th day of October 2026
32- Copy of order be communicated to all concerned, as per rules.
