Case Law Details
Additional Commissioner of Commercial Taxes Vs Shankara Infrastructure Materials Ltd. (Supreme Court of India)
The Hon’ble Supreme Court in the case of The Additional Commissioner of Commercial Taxes v. M/s Shankara Infrastructure Materials Ltd. [arising out of SLP (Civil) No. 5504 of 2022 dated October 14, 2024] granted leave and allowed appeal, wherein M/s. Shankara Infrastructure Materials Ltd. (“the Respondent”) was duly served notice, however, no appearance was made before the officer.
Further, on July 19, 2024, the case was last listed. The Additional Commissioner of Commercial Taxes [“the Petitioner”] contended that the case the case in hand covered by the judgment of State of Karnataka v. Ecom Gill Coffee Trading Private Limited [Civil Appeal No. 230 of 2023] and alleged that the case is of bogus claim without any actual transactions. Hence, the Assessee cannot claim the Input Tax Credit (“ITC”). Transactions with a non-existing or bogus entities do not satisfy the criterion for claiming ITC.
The Court relied on the case of Ecom Gill Coffee Trading Private Limited (supra) and disposed of the case.
Our Comments:
Section 70 of the Karnataka Value Added Tax Act, 2003 (“the KVAT Act”) in sub section (1) states that for the purposes of payment or assessment of tax or any claim to ITC under the KVAT Act, the burden of proving that any transaction of a dealer is not liable to tax, or any claim to deduction of input tax is correct, shall lie on such dealer. Further, Sub Section (2) states that where a dealer knowingly issues or produces a false tax invoice, credit or debit note, declaration, certificate or other document with a view to support or make any claim that a transaction of sale or purchase effected by him or any other dealer, is not liable to be taxed, or liable to tax at a lower rate, or that a deduction of input tax is available, the prescribed authority shall, on detecting such issue or production, direct the dealer issuing or producing such document to pay as penalty:
a. in the case of first such detection, three times the tax due in respect of such transaction or claim; and
b. in the case of second or subsequent detection, five times the tax due in respect of such transaction or claim.
Lastly, Sub Section (3) of the KVAT Act states that before issuing any direction for the payment of the penalty under this Section, the prescribed authority shall give to the dealer the opportunity of showing cause in writing against the imposition of such penalty.
In the case of Ecom Gill Coffee Trading Private Limited (supra), the Hon’ble Supreme Court held as under:
- Noted that, the burden of proving that the ITC is correct, lies on the purchasing dealer and merely claiming to be a bona fide purchaser is not enough to discharge this burden. The dealer must provide additional evidence and proof of the actual physical movement of goods.
- Relied on the judgment of On Quest Merchandising India Pvt. Ltd. v. Government of NCT of Delhi [Writ Petition (Civil) No. 6093/2017 dated October 26, 2017], wherein, it was noted that, the ITC can only be claimed on genuine transactions of sale and purchase as per Section 70 of the KVAT Act and the burden is upon the purchasing dealer to prove the same while claiming ITC and stated that, if a dealer produces false documents to support their claim, they are liable for penalties.
- Observed that, concerned purchasing dealers failed to discharge the burden cast upon them as per Section 70 of the KVAT Act.
- Held that, until the purchasing dealer discharges the burden cast under Section 70 of the KVAT Act, and proves the genuineness of the transaction/purchase and sale by producing the relevant materials, such purchasing dealer shall not be entitled to ITC.
- Further held that, the second Appellate Authority and the High Court have upset the concurrent findings given by the Appellant as well as the first Appellate Authority, on irrelevant considerations that producing invoices or payments through cheques are sufficient to claim ITC which, is erroneous. Stated that, the reliance on Rule 27 and Rule 29 of the KVAT Rules by purchasing dealers is insufficient to prove the actual physical movement of goods, which is required to discharge the burden of proving the genuineness of transactions as per Section 70 of the KVAT Act.
- Further stated that, in the absence of any cogent material like furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc, the Appellant was justified in denying the ITC, which was confirmed by the first Appellate Authority.
- Held that, the second Appellate Authority as well as the High Court have materially erred in allowing the ITC despite the concerned purchasing dealers failed to prove the genuineness of the transactions and failed to discharge the burden of proof as per Section 70 of the KVAT Act. Quashed and set aside the Impugned Judgment and the Impugned Order. Restored the order passed by the Appellant.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Leave granted.
2. Heard Mr. V. N. Raghupathy, learned counsel appearing for the appellant.
3. The notice on the respondent (assessee) was duly served but as can be seen from the office report, none has entered appearance on their behalf.
4. On 19.07.2024, when this case was last listed, Mr. Raghupathy appearing on behalf of the Revenue had submitted that the present case is squarely covered by the ratio of the judgment in State of Karnataka Ecom Gill Coffee Trading Private Limited reported in 2023 SCC OnLine SC 248. It is submitted that since this is a case of bogus claim without any actual transactions, the assessee cannot claim the input tax credit. Transactions with a non-existing or bogus entities do not satisfy the criterion for claiming input tax credit.
5. Having considered the above submission and the absence of any contest from the side of the respondent, we dispose of the appeal in light of ratio in Ecom Gill Coffee Trading Private Limited (supra). The appeal stands allowed in terms of the said judgment.
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