Madras HC allows Opportunity to Prove Goods Movement for Alleged Wrong ITC Claims

Ravi Chitra Vs Assistant Commissioner (ST) (Madras High Court)

In a recent judgment, the Madras High Court addressed the issue of Input Tax Credit (ITC) claim disputes, emphasizing the necessity of providing evidence of the actual movement of goods. The case of Ravi Chitra Vs Assistant Commissioner highlights the importance of ensuring proper documentation to substantiate ITC claims.

Detailed Analysis:

1. Background of the Case: The petitioner contested a tax demand order dated 30.08.2023, arguing that they were not given a fair opportunity to contest the tax demand on its merits. The dispute arose from a show cause notice alleging wrongful availing of ITC for the tax period 2017-2018.

2. Petitioner’s Response: The petitioner responded to the show cause notice on 03.04.2023, presenting various documents such as original tax invoices, bank statements, ledger accounts, and relevant returns of the supplier and petitioner. However, the impugned order was issued on 30.08.2023, without the petitioner’s knowledge.

3. Court’s Observations: The Court noted that while the petitioner provided several documents, including bank statements and GSTR returns, there was a lack of evidence regarding the actual movement of goods, such as e-way bills, lorry receipts, or weighment slips. The tax proposal was largely confirmed due to this absence of proof.

4. Judgment and Remand: The Madras High Court set aside the impugned order and remanded the matter for reconsideration. However, the petitioner was required to remit 20% of the disputed tax demand as a condition for remand. Additionally, the petitioner was granted two weeks to submit additional documents to establish the actual movement of goods.

5. Opportunity for the Petitioner: The Court directed the Assistant Commissioner to provide a reasonable opportunity, including a personal hearing, to the petitioner. Upon satisfaction of the remittance condition and receipt of additional documents, the Assistant Commissioner was instructed to issue a fresh order within two months.

Conclusion: The judgment in the case of Ravi Chitra Vs Assistant Commissioner underscores the significance of providing evidence of the actual movement of goods in ITC claim disputes. While the petitioner had submitted various documents, the absence of proof of goods movement led to the confirmation of the tax proposal. The Madras High Court’s ruling emphasizes the importance of proper documentation and provides an opportunity for the petitioner to rectify the deficiency and contest the tax claim on its merits.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

An order dated 30.08.2023 is assailed on the ground that the petitioner did not have a reasonable opportunity to contest the tax demand on merits.

2. In respect of the tax period 2017-2018, the petitioner received a show cause notice dated 06.06.2022 alleging that the petitioner had wrongly availed of Input Tax Credit (ITC). Such show cause notice was replied to on 03.04.2023 by contending that the transaction was genuine. In support of such statement, the petitioner annexed the original tax invoices, bank statement, ledger account and relevant returns of the supplier and the petitioner. The impugned order was issued thereafter on 30.08.2023.

3. Learned counsel for the petitioner submits that the petitioner was unaware of the issuance of the impugned order because GST compliances were being taken care of by her tax consultant. It is further stated that such order came to the notice of the petitioner only upon receipt of an order of attachment dated 18.03.2024 in relation to the bank account of the petitioner.

4. Learned counsel for the petitioner seeks another opportunity for the petitioner to place all relevant documents on record and contest the tax claim on merits. On instructions, he submits that the petitioner agrees to remit 20% of the disputed tax demand as a condition for remand.

5. Mr.V.Prashanth Kiran, learned Government Advocate, accepts notice for the 1^st respondent. By drawing reference to the impugned order, learned counsel points out that three reminders for personal hearing were issued to the petitioner. He also submits that all the three dates of personal hearing were subsequent to the petitioner’s reply dated 03.04.2023. As regards the petitioner’s reply, he submits that the petitioner did not submit any documents to establish actual movement of goods.

6. On perusal of the petitioner’s reply, it appears that the petitioner submitted original tax invoices, the ledger account pertaining to the supplier concerned, bank statement and relevant GSTR returns. The petitioner does not appear to have submitted e-way bills, lorry receipts, weighment slips and the like to establish actual movement of goods. On examining the impugned order, it appears that the tax proposal was confirmed largely on the ground that there was no proof of actual movement of goods. By taking into account the nature of documents submitted by the petitioner, which include the bank statement showing payments made to the supplier, the GSTR 2A indicating the availability of ITC, it is just and appropriate that the petitioner be provided an opportunity to produce relevant documents to prove actual movement of goods. As a condition for remand, however, it is also necessary to put the petitioner on terms.

7. In the facts and circumstances outlined above, the impugned order dated 30.08.2023 is set aside and the matter is remanded for reconsideration on condition that the petitioner remits 20% of the disputed tax demand as agreed to within a period of two weeks from the date of receipt of a copy of this order. The petitioner is also permitted to submit additional documents within the aforesaid period to establish actual movement of goods. Upon receipt of additional documents from the petitioner and on being satisfied that 20% of the disputed tax demand was received, the 1^st respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within two months from the date of additional documents from the petitioner. As a consequence of the impugned order being set aside, the order of attachment is raised.

8. The writ petition is disposed of on the above terms without any order as to costs. Consequently, connected miscellaneous petitions are closed.