HC Criticizes Appellate Authority for Overlooking Petitioner’s Documentation

Shiva Chemicals & Anr. Vs Assistant Commissioner of Revenue (Calcutta High Court)

The case of Shiva Chemicals & Anr. Vs Assistant Commissioner of Revenue presented a significant legal challenge concerning the denial of Input Tax Credit (ITC) under the WBGST/CGST Act, 2017. This judgment from the Calcutta High Court scrutinizes the validity of the ITC claims and the procedural compliance by the petitioner, offering crucial insights into GST law and its implications for businesses.

1. Background and Context

The writ petition was filed challenging the order dated April 13, 2022, under Section 73 of the WBGST/CGST Act, 2017. The primary issue revolved around the admissibility of ITC claimed by Shiva Chemicals against supplies received from several suppliers whose GST registrations had been retrospectively canceled.

2. Show Cause Notice and Adjudication

The petitioner received a show-cause notice for availing and utilizing ITC amounting to ₹18,79,978/-. The notice was based on the assertion that the suppliers’ registrations were canceled before the period in question, rendering the ITC inadmissible. This culminated in an adjudication order passed on April 13, 2022, which the petitioner appealed.

3. Appellate Proceedings

During the appeal, Shiva Chemicals produced several documents, including the party ledger, tax invoices, bank statements, and GSTR-2A returns. Despite these submissions, the appellate authority upheld the denial of ITC, citing insufficient evidence of the movement of goods and other transactional documentation.

4. Key Contentions by Petitioners

• Production of Documents: The petitioners argued that they provided all necessary documents, including e-way bills, to substantiate their ITC claim.
• Validity of Supplier Registration: The petitioners highlighted that the suppliers’ GST registrations were valid during the relevant period.
• Burden of Proof: They contended that they had fulfilled their burden of proof under Section 155 of the Act by providing the required documentation.

5. Respondents’ Argument

The respondents maintained that the petitioners failed to provide adequate proof of the movement of goods, including loading and transportation expenses, thereby justifying the denial of ITC.

6. Court’s Observation

The High Court noted that the petitioner had discharged their initial burden of proof by presenting comprehensive documentation. The court criticized the appellate authority for glossing over these documents and failing to specify what additional documents were necessary. The judgment emphasized that the initial proof provided by the petitioner should not have been dismissed without due consideration.

7. Conclusion and Remand

The court found the appellate authority’s decision to be perverse and indicative of non-application of mind. It remanded the matter back to the appellate authority for reconsideration, directing it to reassess the case based on the available documents. The court instructed that if the documents provided matched the transactions, the ITC should not be questioned further.

Conclusion

The judgment in Shiva Chemicals & Anr. Vs Assistant Commissioner of Revenue underscores the importance of thorough documentation in ITC claims under GST law. It also highlights the judiciary’s role in ensuring fair consideration of evidence and adherence to procedural requirements. The case sets a precedent for future disputes concerning ITC and the burden of proof, reinforcing the need for clear guidelines and meticulous compliance by businesses and tax authorities alike.

FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT

1. The present writ petition has been filed, inter alia, challenging the order dated 13^th April 2022 passed under Section 73 of the WBGST/CGST Act, 2017 (hereinafter referred to as the “said Act”).

2. Shorn of unnecessary details the facts are that a show cause notice was issued to the petitioner no. 1 for availing and utilizing Input Tax Credit (in short “ITC”) amounting to Rs.18,79,978/- against the claimed supply received from Dhiraj Kumar Sharma, Prakash Prasad, Arnab Das and Gopal Das (hereinafter referred to as “suppliers”) for the period from September 2017 to June 2020. According to the respondents the ITC was found to be inadmissible, since, the registration of the said suppliers had been cancelled from 01.07.2017, 04.07.2019, 14.07.2019 and 30.10.2019 respectively. The aforesaid show-cause ultimately culminated in an adjudication order, passed under Section 73(9) of the said Act on 13^th April, 2022.

3. Being aggrieved, the petitioner no. 1 had filed four separate appeals. The present writ petition, however, is confined to the order passed by the appellate authority in connection with the claimed supply received from Dhiraj Kumar Sharma.

4. It is the petitioner no.1’s contention that simultaneously with the filing of the appeal, the petitioner no. 1 had made a pre-deposit of 10 per cent as is required to be made for maintaining an appeal. In course of hearing of the appeal, the petitioner no.1 had disclosed all relevant documents. Unfortunately, the appellate authority by glossing over the same had passed the order impugned.

5. Roy Chowdhury, learned advocate appearing for the petitioners by drawing attention of this Court to the order dated 17^th July 2023 submits that at the time of hearing of the appeal the petitioner no. 1 had produced several documents. The factum of production of the documents are recorded in the order which, inter alia, includes the following: –

(1) Party Ledger of M/s D S Bitumix for the period 01.04.2017 to 31.03.2018 showing total Credit amounts to Rs.14,79,720/- and payment through HDFC Bank amounts to Rs.9,67,600/-

(2) Four inward supply Tax invoices mentioned in Table-A in this order

(3) Bank Statement [DHFC Bank] payment was made on 28.11.2017, 27.12.2017 and 15.03.2018

(4) Copy of GSTR-2A of the appellant wherein shown the name of the selling dealer.”

6. It is submitted that all the aforesaid documents had been marked D as an Exhibit. By drawing attention of this Court to the GSTR-2A appearing at page 139 of the writ petition it is submitted that the petitioner no.1’s supplier M/s D. S. Bitumix which is the sole proprietorship firm of Dhiraj Kumar Sharma had duly filed the returns and such fact would corroborate from page 139 of the writ petition. Ms. Roy Chowdhury has also drawn the attention of this Court to the relevant bank statements and the e-way bills. The e way bills would reflect the name and particulars of the transporter. By referring to Rule 139 of the WBGST/CGST Rules,2017 (hereinafter referred to as the “said Rules”) it is submitted that the e way bills contain all relevant information in relation to supply, inter alia, including the particulars of the conveyance through which the supply was effected. Notwithstanding the aforesaid, the appellate authority had glossed over the same and had, recorded that in absence of disclosure of the transporter and other documents, the petitioner no. 1 is not eligible to avail ITC. It is still further submitted that the appellate authority had failed to identify the documents, the petitioner no. 1 would be required to disclose, since, all known documents which were in the custody of the petitioner no. 1, had been placed on record especially when the relevant period of supply was between September 2017 and October 2017 for which the returns had been filed by the petitioner no. 1’s supplier, Dhiraj Kumar Sharma.

7. Roy Chowdhury further submits that the respondents may have been persuaded to deny ITC to the petitioner no. 1 by proceeding on the premise that the registration of the petitioner no.1’s supplier namely, M/s Dhiraj Kumar Sharma had been cancelled. The cancellation is however, with effect from 10^th March 2021. The same would appear from the order passed under Section 73(9) of the said Act dated 13^th April, 2022. The aforesaid would clearly demonstrate that for the relevant period for which the petitioner had availed and utilized ITC, the said Dhiraj Kumar Sharma had a valid registration and as such, the same could not also be a ground for determination of inadmissibility of ITC for the period prior to March 2021. In the circumstances as aforesaid, it is submitted that the order passed by the appellate authority is based on no evidence and the same is perverse and should be set aside and the petitioner no.1 should be given the benefit of ITC for the relevant period.

8. Siddiqui, learned advocate appearing for the respondents at the very outset by drawing attention of this Court to Section 155 of the said Act submits that in the event any person claims to be eligible for ITC, the burden of proof of such claim lies on such person. Since, the petitioner no. 1 had failed to discharge its burden by producing necessary documents, ITC had been denied. By placing before this Court, the order dated 17^th July 2023, it is submitted that in the instant case the petitioner no. 1 had failed to prove that the petitioner no. 1 had actually received goods from the claimed supplier.

9. It is also submitted that the petitioners could not produce documents which could establish that the goods had moved. According to him the petitioner no. 1 had failed to substantiate with documents the loading expenses, transportation expenses, unloading expenses and other vouchers to establish the factum of transportation. In the facts and circumstances of the case it is submitted that no case for interference has been made out and the instant writ petition deserves to be dismissed with costs.

10. Heard the learned advocates appearing for the respective parties and considered the materials on record. In this case it is noticed that a show cause notice had been issued on the petitioner no.1 as regards the petitioner no.1 availing and utilizing ITC from four separate suppliers, since, the respondents claimed that the transactions in question were fictitious. The said show cause notice had ultimately culminated in the order date 13^th April 2022. However, this writ petition is confined to the supplies allegedly made by Dhiraj Kumar Sharma to the petitioner no. 1 in respect of the tax period from September 2017 to October 2017. The petitioner no. 1, in the appeal filed therefrom, which is confined to the supplies allegedly effected by Dhiraj Kumar Sharma had disclosed and produced documents which included four inward tax supply invoices mentioned in Table – A of the order, party ledger for the period from 1 ^st April, 2017 to 31^st March, 2018, bank statements and copy of the GSTR-2A. Admittedly, in this case the petitioner no.1’s supplier had filed returns for the relevant tax period. It is also noticed that the relevant e waybills had also been disclosed by the petitioner no.1 which, inter alia, include the name of the transporter.

11. The bank statement in support of the transactions claimed by the petitioner no. 1 had also been disclosed. The appellate authority, however, by glossing over the same concluded that the petitioner no. 1 having failed to produce transport and other documents, and in absence thereof, the petitioner no.1 was ineligible for ITC. The appellate authority had also recorded in its order that the petitioner no.1 could not produce documents to establish that the goods had moved.

12. Although, Mr. Siddiqui has strenuously argued that the burden of proof lies with the petitioner no. 1 to prove that the goods had been moved and the petitioner no. 1 had failed to discharge the burden, I would rather notice that in the instant case the petitioner no. 1 had discharged its initial burden in establishing the sanctity of the transaction by placing the e way bills, which were admittedly issued through the respondents, the invoices, the bank statement and Form GSTR – 2A which in no uncertain terms would demonstrate that during the relevant period the petitioner no. 1’s supplier had filed its returns and would prove conclusiveness of the financial transactions.

13. Having regard thereto, though the petitioner no. 1 had discharged its initial burden of proof, the appellate authority had, by glossing over the same without indicating the documents required to be disclosed by the petitioner no. 1, arrived at a finding that the petitioner no. 1 is not eligible for ITC. In this context, it may be noted that the finding returned by the appellate authority that the petitioner no.1 is not eligible for ITC in absence of transport and other documents, appears to be verbatim reproduction of the observations made by the adjudicating authority/ proper officer, in the order dated 13^th April 2022.

14. To that extent, I find that the aforesaid order suffers from non-application of mind and is perverse. In my view the appellate authority ought to have indicated and specified as to what other documents the petitioner no.1 was required to be disclosed to establish the genuinity of the transaction. Although, in page 198 of instant writ petition it appears that the appellate authority had recorded that the petitioner no. 1 could not establish that the goods had been moved and had failed to produce and substantiate the same by disclosure of documents like loading expenses, transportation expenses, unloading expenses and other vouchers, I am of the view that unless, the respondents are able to overcome the initial discharge of burden of proof by the petitioner no.1, by impeaching the documents disclosed by the petitioner no.1 which admittedly had not been challenged by the respondents, the proper officer or the appellate authority could not have held that by reasons of non-disclosure of documents like loading expenses, transportation expenses, unloading expenses and vouchers in this regard reflected in the cash book, the petitioner no. 1 is not entitled to avail the benefit of ITC.

15. Be that as it may, the aforesaid matter in my view requires reconsideration by the appellate authority. As such, the matter is remanded back to the appellate authority. The appellate authority in the facts of the case is directed to reconsider the matter with respect to the issue of movement of goods in the light of the observations made hereinabove and test out whether the e-way bills, tax invoices, bank statements and party ledger disclosed by the petitioner no.1 match with the transactions for the relevant period for which ITC had been availed and utilized. If, on the basis of the materials available, which remains unchallenged, the appellate authority is of the opinion that the e-way bills, tax invoices, bank statements and party ledger match the relevant transactions then the genuinity of the transactions/ movement of goods shall not be questioned further, and it shall decide the appeal upon giving an opportunity of hearing to the petitioner no.1 or its representative, as expeditiously as possible preferably within a period of 8 weeks from the date of communication of this order.

16. The petitioner shall be at liberty to disclose additional documents, if so advised. It is made clear that the deposit made by the petitioner no. 1 in terms of the order passed by this Court on 16^th November 2023 shall be treated as pre-deposit for all practical purposes within the meaning of Section 112(8) of the said Act.

17. With the above directions and observations, the writ petition being WPA 23579 of 2023 is disposed of.

18. There shall be no order as to costs.

19. Urgent photostat certified copy of this order, if applied for, be made available to the parties upon compliance of necessary formalities.