Devi Traders Vs State Tax Officer (Inspection) 5 (Madras High Court)
The Madras High Court recently dismissed a batch of writ petitions in Devi Traders Vs. State Tax Officer, upholding assessment orders that denied Input Tax Credit (ITC) claims. The petitioners, who had purchased goods from suppliers later found to be problematic, argued they were denied the opportunity to cross-examine the suppliers, violating principles of natural justice. They also contended that since assessment orders were passed against the suppliers, recovery of ITC from them would amount to double taxation. The court, however, emphasized the petitioners’ failure to provide crucial documentation, including e-way bills, to substantiate the actual receipt of goods.
The court’s decision hinged on the interpretation of Section 16(2) of the CGST Act and related rules, which stipulate that a recipient of goods must possess not only tax invoices but also documents proving the physical supply and receipt of goods to validly claim ITC. The court highlighted the significance of e-way bills under Rule 138 of the CGST Rules, which are mandatory for the transport of goods exceeding Rs. 50,000, unless specifically exempted. In this case, the goods in question, rubber and rubber sheets, were not exempt, and the petitioners failed to produce e-way bills or other transport documents to demonstrate the movement of goods from the suppliers to their businesses.
The court acknowledged the petitioners’ grievance regarding the inability to cross-examine the suppliers, but pointed out that the suppliers’ statements were recorded in the presence of the petitioners, who were also signatories to those statements. This, the court held, distinguished the case from situations where statements are obtained behind the back of the affected parties. The court also clarified that quasi-judicial proceedings under GST law are not bound by strict rules of evidence, requiring only a conclusion based on available records and the preponderance of probabilities.
The Madras High Court, relying on established jurisprudence including the Supreme Court’s ruling in State of Karnataka vs. Ecom Gill Coffee Trading Pvt. Ltd., reiterated the principle that the burden of proof lies with the taxpayer claiming ITC to demonstrate the genuineness of the transaction and the actual receipt of goods. The court emphasized that mere possession of invoices is insufficient; corroborative evidence, such as e-way bills, transport documents, and proper maintenance of accounts as per Rule 56 of the CGST Rules, is essential. The absence of such documentation in the Devi Traders case led the court to uphold the denial of ITC, underscoring the importance of meticulous record-keeping and compliance with GST regulations for businesses seeking to avail ITC benefits. While granting the petitioners liberty to appeal, the court’s decision reinforces the stringent requirements for ITC claims and the taxpayer’s responsibility to provide robust evidence of goods receipt.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
