GST ITC Dispute Remanded as Supplier Registration Was Valid During Transactions

Tvl. Sri Subramanian Industries Vs State Tax Officer (Madras High Court)

In this case before the Madras High Court, the writ petition challenged an assessment order dated 25.05.2025 passed against the petitioner concerning denial of input tax credit (ITC). The tax authorities alleged that the petitioner had claimed ITC and exemption on supplies allegedly made to Government authorities through transactions involving non-existent suppliers. According to the department, the transactions amounted to bill trading without actual purchase or supply of goods.

The petitioner contended that the transactions related to genuine government contracts that had been duly executed. It was submitted that bathroom doors, toilet doors, and other materials had actually been installed in Government properties. The petitioner argued that the allegation regarding non-existent suppliers was factually incorrect because the suppliers’ GST registrations were valid on the dates of purchase and were cancelled only subsequently.

The petitioner further submitted that bills and documents evidencing movement of goods and actual transactions were available and could be produced before the respondent authority. However, due to reasons beyond the petitioner’s control, those documents could not be produced during the enquiry proceedings.

The Additional Government Pleader argued that the burden of proof rested entirely on the assessee under Section 155 of the Tamil Nadu Goods and Services Tax Act, 2017. It was submitted that the petitioner was required to produce documentary proof to substantiate the ITC claim and satisfy the assessing officer regarding the genuineness of the transactions.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The writ petition is filed challenging the impugned order dated 25.05.2025. The impugned order is an order of assessment passed under

2. When the petitioner claimed input tax credit and availed exemption stating that the supply was made to the Government authorities, it was found that the transactions shown by the petitioner were with non­existent suppliers and amounted to bill trading transactions without actual purchase or supply of goods.

3. The learned counsel for the petitioner submits that, as a matter of fact, these are government contracts and the works have been duly executed. The bathroom doors, toilet doors and other materials have, as a matter of fact, been fixed in the Government properties. The alleged non-existence of the sellers of the petitioner is factually incorrect since, as on date of purchase, their registration was in existence. It is only subsequently that the registration stood cancelled. The petitioner is having bills and other documents for more movement of goods and is in a position to produce the same before the respondent authority in respect of the proof of the actual transaction. However, only for the reasons beyond the control of the petitioner, the petitioner could not avail the opportunity during the enquiry and produce the same.

4. Per contra, the learned Additional Government Pleader would submit that it is for the assessee to produce such documents in proof of their claim and to convince the assessing officer. The burden of proof is only on the petitioner in view of Section 155 of the Tamil Nadu Goods and Services Tax Act, 2017.

5. I have considered the rival submissions made on either side and perused the material records of the case.

6. It is true that the burden of proof is only on the petitioner/assessee. However, considering the submissions made that the goods were actually procured and supplied to the Government and that the registration of the suppliers was in existence as on the date of the transaction and it is now submitted that the petitioner is having proof for movement of goods etc., I am of the view that the petitioner can be given an opportunity. Considering the lapse of time, the same can be granted only on the condition of deposit of 25% of the disputed tax.

7. In view thereof, the Writ Petition is allowed on the following terms:-

i. The petitioner shall deposit 25% of the disputed tax amount within a period of four weeks from the date of receiving the web copy of the order.

ii. Upon such deposit, the impugned order dated 25.05.2025 shall stand set aside and the matter shall stand remanded back to the file of the respondent.

iii. It will be open for the petitioner to file such additional reply and produce such document in support of its claim and it is for the respondent to consider the matter afresh and pass orders in the manner known to law.

No costs. Consequently, connected Miscellaneous Petition is closed.