Delhi HC allows GST ITC Despite Supplier’s GSTN Error

B. Braun Medical India Pvt. Ltd. Vs Union of India & Ors (Delhi High Court)

The Delhi High Court addressed a petition filed by B. Braun Medical India Pvt. Ltd. against an order that denied their Input Tax Credit (ITC) claim. The core issue stemmed from a supplier, M/s. Ahlcon Parenterals (India) Limited, incorrectly stating B. Braun’s Bombay GSTN on invoices, instead of their Delhi GSTN. This error resulted in a demand of approximately Rs. 5.66 crore being raised against B. Braun. The com-pany argued that the incorrect GSTN was a simple supplier error, and they provided purchase orders and invoices to substantiate their claim of being a Delhi-based entity. The court noted that the Department’s counter-affidavit did not contest the fact that the company’s name was correctly listed on the invoices. Further, the Department admitted that no other entity had claimed ITC on these specific purchases, highlighting the sole basis for rejection being the GSTN error. The court acknowledged the potential for substantial financial loss to B. Braun if the ITC was denied due to this minor error.

The court, after examining the submissions and the counter-affidavit, decided to allow B. Braun’s petition in part. The impugned order, which had rejected the ITC claim, was set aside. The court permitted B. Braun to avail the ITC for the specified periods, which included financial years 2017-18, 2019-20, and 2020-21, totaling Rs. 5,65,91,691. This decision was made on the understanding that B. Braun would not pursue its challenge to the constitutional validity of Section 16(2)(aa) of the Central Goods and Ser-vices Tax Act, 2017, if the ITC was granted. The court emphasized the factual supply of goods and the absence of any other ITC claim on the same transactions. The ruling effectively prioritized the substance of the transaction over a procedural error, ensuring that the company was not penalized for a mistake made by its supplier. The judgment underscores the importance of considering the practical aspects of business transactions and the need for a balanced approach in enforcing tax regulations.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. This hearing has been done through hybrid mode.

2. The present petition has been filed under Article 226 and 227 of the Constitution of India challenging,

(i) impugned order dated 28th June, 2024, being Order-in-Original no. 04/HK/JC/CGST/DSC/2024-25, issued by the Id. Joint Commissioner of Central Goods and Services Tax, Delhi, South Commissionerate, and

(ii) the vires of Section 16(2)(aa) of the Central Goods and Services Tax Act, 2017.

3. Vide the impugned order a demand to the tune of Rs.5,65,91,691/- has been raised against the Petitioner on the ground that the Petitioner has wrongly availed of excess Input Tax Credit (hereinafter ITC).

4. Petitioner is a company, which is engaged in the sale of various pharmaceutical products and medical devices. The case of the Petitioner is that it had purchased a large quantum of products from M/s. Ahlcon Parenterals (India) Limited (hereinafter ‘Ahlcon”) on the basis of various purchase It is stated that the invoices for the said products were raised by Ahlcon on the Petitioner, however, the said invoices inadvertently reflected the Bombay address and Bombay GSTN of the Petitioner, instead of the Delhi GSTN number. This has led to the impugned demand.

5. On the last hearing e., 8th January, 2025, Mr. Tarun Gulati, Id. Senior Counsel appearing on behalf of the Petitioner, relied upon the purchase orders and invoices, to submit that, the Petitioner is clearly a Delhi based company and incorrect reflection of Petitioner’s Bombay GSTN on the invoices was merely an error by the supplier.

6. However, the Department had taken a stand that the Petitioner is not entitled to the ITC and has accordingly, passed the impugned order.

7. Today, the counter affidavit has been placed on record and the Court has pursued it.

8. As noted in the previous order, the fact of the matter is that the Petitioner’s name is correctly mentioned in the invoices, however, the wrong GST number, e., of the Bombay office has been mentioned. On this issue, there is no stand taken by the Department in the counter affidavit. On a direct query being put to the ld. Standing Counsel for the Respondent/Department, he fairly admits that no other entity has also claimed at the ITC on these purchases. The only basis for rejecting the ITC is the mention of the Bombay office GSTN instead of the Delhi office GSTN. Substantial loss would be caused to the Petitioner if the credit is not granted for such a small error on behalf of the supplier.

9. Mr. Gulati, lastly submits that if the correction in the invoices is permitted and the Petitioner is provided the Input Tax Credit (ITC), the challenge to the constitutional validity shall not be pressed by the Petitioner.

10. In view of the above submissions and circumstances, the prayer of the Petitioner is allowed to the following extent:

(i) The impugned Order in Original dated 28^th June, 2024 rejecting the ITC is set aside.

(ii) The Petitioner is permitted to avail of the Input Tax Credit in respect of the following supplies for the following period:

11. None of the other reliefs are Accordingly, the petition is partly allowed and is disposed of in above terms. All pending applications, if any, is also disposed of.