Ambika Brass Products Vs State of Gujarat (GVAT Ahmedabad)
In a significant ruling for a local brass products manufacturer, the Gujarat Value Added Tax (GVAT) Tribunal, Ahmedabad, has allowed Input Tax Credit (ITC) claims previously denied by lower tax authorities. The case, involving Ambika Brass Products and the State of Gujarat, centered on the genuineness of purchase transactions from a supplier whose registration was cancelled retrospectively. The tribunal’s decision, delivered on April 28, 2025, impacts the financial years 2010-11 and 2011-12 under both the GVAT and Central Sales Tax (CST) Acts.
Ambika Brass Products had challenged orders from the Deputy Commissioner of Commercial Tax (First Appellate Authority) for the two assessment periods. These appeals stemmed from original assessment orders by the Assistant Commissioner of Commercial Tax (Assessing Officer) that disallowed ITC on purchases made from M/s. Mayur Metal Corporation.
The core of the dispute lay in the tax department’s stance that the supplier, M/s. Mayur Metal Corporation, had its registration cancelled ab initio from July 1, 2002, by an order dated March 20, 2014. Based on this retrospective cancellation, the department treated the transactions between Ambika Brass Products and M/s. Mayur Metal Corporation as non-genuine, leading to the denial of ITC.
Appearing for Ambika Brass Products, Advocate Apurva Mehta argued that the purchases from M/s. Mayur Metal Corporation were genuine transactions despite the supplier’s registration cancellation. He presented a range of documentary evidence to substantiate this claim, including tax invoices containing details of transportation, waybridge slips confirming the movement of goods, and bank statements showing payments made to the supplier.
Mr. Mehta highlighted the geographical proximity of the two businesses, both located within the same GIDC estate in Dared, Jamnagar. He submitted that transportation between the units was typically carried out using smaller vehicles known locally as ‘Chakada’, and provided registration details for these vehicles. The appellant’s counsel contended that these pieces of evidence collectively proved the physical movement of goods and the completion of the transactions.
During the tribunal hearing, the submitted evidence was provided to the learned Government Representative (GR) for verification. The appellant’s side argued that this verification did not uncover any adverse findings to contradict the genuineness of the transactions. Mr. Mehta specifically referenced the judgment of the Hon’ble High Court of Gujarat in the case of Ecom Gill Coffee Trading Pvt. Ltd. (Civil Appeal No. 230/2023), asserting that the appellant had met the requirements laid down in that ruling for proving the genuineness of transactions to be eligible for ITC. The Ecom Gill case is notable for discussing the burden of proof on the purchasing dealer to demonstrate the authenticity of transactions and movement of goods when claiming ITC, especially in situations involving non-compliant or deregistered suppliers.
The Government Representative, Mr. V.B. Prajapati, presented a written submission and a spot visit report concerning the supplier’s premises. He confirmed the ab initio cancellation of M/s. Mayur Metal Corporation’s registration from July 1, 2002. The spot visit report, conducted on August 14, 2024, indicated that the supplier’s business place was closed, lacked a sign board, and local inquiries suggested the business had not been operational for at least the preceding 4 to 5 years.
Responding to the spot visit report, Mr. Mehta pointed out that the visit occurred in 2024, roughly 13 years after the purchase transactions in question (2010-11 and 2011-12). He argued that a business closing down over such a long period did not prove it was non-existent or that transactions were bogus during the relevant assessment years. He noted that the report itself suggested the supplier might have been in business up to 2018-19.
The tribunal carefully considered the submissions and evidence from both sides. It observed that the Assessing Officer’s initial disallowance of ITC was based on a perfunctory remark regarding the supplier’s registration. The tribunal granted numerous adjournments to the Government Representative to verify the evidence provided by the appellant and produce counter-evidence but noted that the GR was unable to demonstrate the presented evidence was not genuine or that the transactions were bogus.
Critiquing the spot visit report, the tribunal found it inconclusive. It noted that the visit was conducted many years after the disputed transactions and the visiting authority failed to collect information about who occupied the premises during 2010-11 and 2011-12. The tribunal stated that the purpose of the spot visit to ascertain the existence of the business place and its occupant during the relevant period was not fulfilled.
Based on the totality of the evidence, the tribunal concluded that the government had failed to prove that the purchase transactions between Ambika Brass Products and M/s. Mayur Metal Corporation during 2010-11 and 2011-12 were fictitious. It found the appellant’s documentary evidence, including invoices with vehicle details, waybridge slips, and payment records, sufficient to prove the genuineness of the transactions. Implicitly following the principle of requiring substantive evidence beyond mere supplier registration status, aligning with the spirit of judgments like Ecom Gill, the tribunal decided to allow the ITC claim.
Consequently, the tribunal allowed the second appeals under the GVAT Act (Nos. 697 & 699 of 2023), permitting the ITC claimed on purchases from M/s. Mayur Metal Corporation. Any higher tax, interest, and penalty assessed due to this disallowance were removed. The First Appellate Authority was directed to recalculate the tax liability after allowing the ITC claim.
Regarding the appeals under the CST Act (Nos. 698 & 700 of 2023), which were consequential, the tribunal directed the First Appellate Authority to adjust any resulting surplus ITC from the GVAT assessment against the CST liability for the corresponding financial years. This direction was given based on the principle established in the judgment of the Hon’ble High Court of Gujarat in the case of Cosmos International, which deals with the adjustment of available VAT ITC against CST liability.
The tribunal ordered the First Appellate Authority to complete the recalculation of liability within three months and granted a stay against recovery proceedings until the recalculation is finalised. The appeals were allowed with no order as to costs.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT VALUE ADDED TAX TRIBUNAL
