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Case Law Details

Case Name : Puthaparambil Shereef Shanavas Vs State Tax Officer (Kerala High Court)
Appeal Number : WP(C) No. 3970 of 2024
Date of Judgement/Order : 15/02/2024
Related Assessment Year :

Puthaparambil Shereef Shanavas Vs State Tax Officer (Kerala High Court)

Introduction: In a significant ruling, the Kerala High Court dismissed a writ petition challenging the blocking of Input Tax Credit (ITC) under the GST regime. The case, Puthaparambil Shereef Shanavas Vs State Tax Officer, centered on the fraudulent claim of ITC based on forged invoices, highlighting the stringent measures embedded in the GST framework to curb tax evasion.

Detailed Analysis

Background of the Case: The petitioner sought to quash the intimation blocking his ITC, arguing against the authority’s decision under Rule 86A of the GST Rules, 2017. This rule empowers the Commissioner or an officer authorized by him to disallow the debit of ITC from the electronic credit ledger if there’s reason to believe that the credit has been fraudulently availed.

Rule 86A in Focus: Rule 86A outlines specific conditions under which ITC claims can be considered fraudulent or ineligible, including:

  • Credit availed on the strength of tax invoices issued by a non-existent business or without the receipt of goods or services.
  • Credit availed on invoices where the tax charged has not been paid to the government.
  • The claimant being non-existent or not conducting any business from the registered place.
  • The claimant not in possession of the required tax invoice or documentation.

Court’s Ruling: The Kerala High Court found that the intimation to block the petitioner’s ITC was within the jurisdiction and aligned with the GST Act and rules. It was determined that the credit was claimed on the basis of forged invoices without actual supply of goods or services, leading to the conclusion that the claim for ITC was fraudulent.

Implications of the Judgment: This ruling underscores the robust framework of the GST law in India, designed to prevent tax evasion through fraudulent claims of ITC. It serves as a cautionary tale for businesses, emphasizing the importance of compliance and the legal repercussions of attempting to exploit the tax credit system.

Conclusion: The Kerala High Court’s decision to dismiss the writ petition against the blocking of ITC based on forged invoices reaffirms the stringent measures under the GST regime to safeguard the tax system against fraud. This case highlights the critical role of Rule 86A in ensuring that only legitimate ITC claims are processed, thereby maintaining the integrity of the GST framework. Businesses are advised to adhere strictly to GST provisions to avoid legal challenges and potential penalties.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

1. The present writ petition has been filed seeking quashing of the intimation to the petitioner blocking the input tax credit.

2. The Rule 86A of the GST Rules, 2017 provides the conditions of use of amount available in the electronic credit ledger and empowers the Commissioner or the Officer authorised by him under Sub-Rule (1) to disallow the debit on electronic credit ledger on being satisfied that the conditions for disallowing the debit exist. Rule 86A of the GST Rules, 2017 reads as under;

RULE 86A- Conditions of use of amount available in electronic credit ledger-

 “(1)Commissioner or an officer authorised by him in this behalf, not below the rank of an Assistant Commissioner, having reasons to believe that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible in as much as:

a) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36-

i. issued by a registered person who has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or

ii. without receipt of goods or services or both; or

b) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36 in respect of any supply, the tax charged in respect of which has not been paid to the Government; or

c) the registered person availing the credit of input tax has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or

d) the registered person availing any credit of input tax is not in possession of a tax invoice or debit note or any other document prescribed under rule 36, may, for reasons to be recorded in writing, not allow debit of an amount equivalent to such credit in electronic credit ledger for discharge of any liability under section 49 or for claim of any refund of any unutilised ”

2) The Commissioner, or the officer authorised by him under sub-rule (1) may, upon being satisfied that conditions for disallowing debit of electronic credit ledger as above, no longer exist, allow such debit.

(3) Such restriction shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction. ”

3. Mr. Reshmita Ramachandran, learned Government Pleader submits that allegations against the petitioner are that the input tax credit has been claimed on the basis of the forged invoices without supply of any goods and services and the competent Officer has reason to believe that the claim for input tax credit is fraudulent claim.

4. This Court does not find that impugned notices/intimation are without jurisdiction or contrary to the law as provided under the GST Act or Rules made thereunder. Therefore, this Court find no ground to interfere with the impugned intimation and Hence this writ petition is hereby dismissed. The adjudication authority is directed to complete the adjudication process expeditiously.

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