Case Law Details
Diya Agencies Vs State Tax Officer (Kerala High Court)
ITC cannot be denied to the recipient solely on the ground that transaction not reflected in GSTR-2A
The Hon’ble Kerala High Court in Diya Agencies v. The State Tax Officer [WP(C) No. 29769 of 2023 dated September 12, 2023] held that, if the taxpayer is able to prove that tax amount is paid to the seller and the Input Tax Credit claim is bonafide so the Input Tax Credit cannot be denied merely on non-reflection of transaction in GSTR-2A.
Facts:
M/s. Diya Agencies (“the Petitioner”) claimed the Input Tax Credit (ITC) of INR 44,51,943.08/- for year 2017-18.
The Revenue Department (“the Respondent”) denied the ITC claim of INR 1,04,376.05/- in respect to invoice not reflected in GSTR-2A.
Aggrieved by the order passed by the Adjudicating Authority the Petitioner filed a writ before the Hon’ble Kerala High Court.
The Petitioner relied upon the judgement of Suncraft Energy Private Limited and Another v. The Assistant Commissioner, State Tax [MAT 1218 of 2023 dated August 02, 2023] wherein the Hon’ble Calcutta High court held that, before reverting the ITC by the assessee, the Adjudicating Authority should take action against the selling dealer if it is found that he has not deposited the tax paid by the assessee. Unless the collusion between the assessee and the seller dealer is proved, the ITC is not to be denied if the assessee has genuinely paid the tax to the seller dealer.
The Petitioner contended that, it has fulfilled all the conditions stated under Section 16(2) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).
The Petitioner further contended that the Central Board of Indirect Tax and Customs (CBIC) had issued press release dated October 18, 2018 clarifying that Form GSTR-2A is the facility to view the details furnished by the supplier in GSTR-1 and cannot impact the ability of the recipient to avail ITC on self-assessment basis in consonance with the provisions of Section 16 of the CGST Act.
Issue:
Whether the taxpayer’s ITC can be denied solely based on ground that transaction not reflected in GSTR-2A?
Held:
The Hon’ble Kerala High Court in WP(C) No. 29769 of 2023 held as under:
- Observed that, that the Petitioner’s claim for ITC has been denied only on the ground that the said amount was not mentioned in the GSTR 2A.
- Noted that, if the supplier has not remitted the said amount paid by the Petitioner to him, the Petitioner cannot be held responsible.
- Directed the Adjudicating Authority to give opportunity to the Petitioner to claim for ITC.
- Considered the CBIC press release dated 18 October 2018 which clarified that GSTR-2A is in the nature of facilitation and does not impact the ability of the taxpayer to avail ITC on self-assessment basis as per Section 16 of the CGST Act.
- Held that, merely on the ground that in Form GSTR-2A the said tax is not reflected should not be a sufficient ground to deny the assessee the claim of the ITC.
- Remanded back to the Adjudicating Authority to give opportunity to the Petitioner to claim for ITC.
Our Comments:
The Kerala High Court in this case underscores the unfairness of denying ITC solely on the basis of non-population of transaction in GSTR-2A. The court recognizes that taxpayers should not be held liable for a condition which is outside the control, such as the non-payment of taxes by the Supplier. The court has instructed the Adjudicating Authority to give taxpayers the chance to furnish evidence in support of their ITC.
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In a recent judgment, the Kerala High Court addressed the issue of denying input tax credit to taxpayers based solely on discrepancies in GSTR-2A. The case, titled Diya Agencies vs. State Tax Officer, revolves around the denial of input tax credit amounting to Rs. 44,51,943.08 for both CGST and SGST.
Detailed Analysis
The petitioner, Diya Agencies, contested the denial of input tax credit, arguing that it should not be solely based on the amounts mentioned in GSTR-2A, as taxpayers have no control over this data. The petitioner emphasized that assessing authorities must independently evaluate input tax credit claims, irrespective of GSTR-2A figures.
To support their case, the petitioner referred to a judgment by the High Court of Calcutta in the case of Suncraft Energy Private Limited and Another vs. The Assistant Commissioner, State Tax, Ballygunge Charge, and others, delivered on 2nd August 2023. Additionally, they cited a Supreme Court decision reported in 2023 (3) TMI 533 SC, involving The State of Karnataka vs. M/s. Ecom Gill Coffee Trading Private Limited.
The court examined Section 16(2) of the GST Act, which outlines the conditions for eligibility to claim input tax credit. While this section mandates that a registered person can only claim input tax credit if the details are mentioned in GSTR-2A, the court emphasized that other conditions under Section 16(2) must also be met.
The petitioner asserted that they had fulfilled all the stipulated conditions and had valid tax invoices from the seller dealer. Their grievance was that, despite meeting these conditions, the assessing authority had reversed the claimed input tax credit.
In its analysis, the court considered the Central Board of Indirect Tax and Customs’ press release from 18th October 2018, which clarified that GSTR-2A’s purpose was to facilitate taxpayers and did not affect their ability to claim input tax credit based on self-assessment, in accordance with Section 16 of the Act. The court also noted that the Supreme Court had ruled in Union of India (UOI) vs. Bharti Airtel Ltd. that GSTR-2A serves as a facilitator for self-assessment.
Drawing from the Calcutta High Court’s judgment, the Kerala High Court emphasized that input tax credit should not be revoked unless the assessing authority takes action against the selling dealer for not depositing the tax collected from the petitioner. The court stated that unless collusion between the taxpayer and the seller dealer is proven, input tax credit cannot be denied if the taxpayer genuinely paid the tax to the seller.
The court referred to another Supreme Court decision in The State of Karnataka vs. M/s. Ecom Gill Coffee Trading Private Limited, which discussed the burden of proof for input tax credit claims. It clarified that the burden of proving the correctness of the input tax credit claim lies with the purchasing dealer, who must provide evidence of genuine transactions, including details of the seller dealer, delivery of goods, freight charges, acknowledgment of delivery, tax invoices, and payment records.
Conclusion
In conclusion, the Kerala High Court’s judgment in Diya Agencies vs. State Tax Officer highlights that denying input tax credit based solely on discrepancies in GSTR-2A is unjust. Taxpayers should not be penalized for issues beyond their control, such as the non-deposit of taxes by the seller dealer. The court has directed assessing authorities to allow taxpayers the opportunity to provide evidence supporting their input tax credit claims. This ruling emphasizes the importance of a fair and evidence-based approach when evaluating input tax credit claims.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
1. The present writ petition in essence has been filed to challenge the assessment order Exhibit P-1 for the assessment year 2017-18 dated 24.05.2022. The petitioner’s claim for the input tax credit of Rs.44,51,943.08/- for CGST and SGST has been limited at excess claim of Rs.1,04,376.05/- as CGST and same amount as SGST credit has been denied on the ground that as per the GSTR 2A in respect of invoice supply, the tax payer is only eligible for input tax amount shown in CGSTR 2A.
2. The Learned Counsel for the petitioner submits that the claim of in-put tax credit cannot be denied merely on the ground of amount mentioned in the GSTR 2A for which the petitioner does not have any control. Learned Counsel for the petitioner further submits that the assessing authority is required to independently examine the claim of input tax credit of the assessee irrespective of the amount mentioned in the GSTR 2A. Learned Counsel for the petitioner placed reliance on the Judgment of the High Court of Judicature at Calcutta in MAT 1218 of 2023 (Suncraft Energy Private Limited and Another v. The Assistant Commissioner, State Tax, Ballygunge Charge and others) delivered on 02.08.2023
. The Learned Counsel for the petitioner also placed reliance on the Judgment of the Supreme Court reported in 2023 (3) TMI 533 SC (The State of Karnataka v. M/s. Ecom Gill Coffee Trading Private Limited).
3. For a dealer to be eligible to avail credit of any input tax, the conditions prescribed in Section 16 (2) of the GST Act has to be fulfilled. Sub-section 2 of Section 16 commences with a non-obstinate clause stating that notwithstanding anything contained in Section 16 (1) no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless mentioned in the clause under Section 2A of the Act.
4. Learned Counsel for the petitioner submits that the petitioner has fulfilled all the conditions as stipulated under Subsection 2 of Section 16 and he has paid the tax to the seller dealer and valid tax invoice has been issued by the seller dealer. The grievance of the petitioner is that despite having fulfilled all the conditions as per the conditions enumerated under Sub-section 2 of Section 16 of the Act, the assessing authority has reversed the credit availed and directed the petitioner to deposit the tax to the extent of disallowance of input tax credit. Learned Counsel for the petitioner submits that the petitioner has supplier dealers and, if they have not de-posited the tax paid by the petitioner, petitioner cannot be asked to pay the tax again .
5. The Central Board of Indirect Tax and Customs had issued press re-lease dated 18.10.2018 clarifying that furnishing of outward details in Form GSTR-1 by the corresponding supplier(s) and the facility to view the same in Form GSTR-2A by the recipient is in the nature of taxpayer facilitation and does not impact the ability of the tax payer to avail ITC on self-assessment basis in consonance with the provisions of Section 16 of the Act. Further, it has been clarified that the apprehension that ITC can be availed only on the basis of reconciliation between Form GSTR-2B and Form GSTR-3B conducted before the due date for filing of the return in Form GSTR-3B for a particular month will be unfounded and the same exercise can be done thereafter also. The Supreme Court in Union of India (UOI) v. Bharti Airtel Ltd. And Others reported in 2022 (4) SCC 328 has opined that Form GSTR-2A is only a facilitator for taking a confirm decision while making the self-assessment. The High Court of Judicature at Calcutta in Suncraft Energy Private Limited and Another (supra) considering the provisions of Section 16 and press release dated 04.05.2018 and 18.10.2018 issued by the Central Board of Indirect Tax and Customs has held that non-performance or non-operatability of Form GSTR-2A or for that matter, other forms will be of no avail because the dispensation stipulated at the relevant time obliged the registered persons to submit return on the basis of such self-assessment in Form GSTR-3B manually on electronic platform. The High Court of Judicature at Calcutta in Suncraft Energy Private Limited and Another (supra) has held that before revetring the input tax credit by the assessee, the assessing authority should take action against the selling dealer if it is found that he has not deposited the tax paid by the assessee. Unless the collusion between the assessee and the seller dealer is proved, the input tax credit is not to be denied if the assessee has genuinely paid the tax to the seller dealer.
6. The Supreme Court in The State of Karnataka v. M/s. Ecom Gill Coffee Trading Private Limited (supra) has held while interpreting the Section 70 of the Karnataka Value Added Tax Act, 2003 which are in respect of claim of input tax credit under KVAT and similar to the provisions of Section 16 of the GST Act has held that; clearly stipulate that the burden of proving that the ITC claim is correct lies upon the purchasing dealer claiming such ITC. Burden of proof is that the ITC claim is correct and is squarely upon the assessee who has to discharge the said burden. Merely because the dealer claiming such ITC claims that he is a bonafide purchaser is not enough and sufficient. The burden of proving the correctness of ITC remains upon the dealer claiming such ITC. Such burden of proof cannot get shifted to the Revenue. It has been further held that mere production of the invoices or the payment made by cheques is not enough and cannot be said to be discharging the burden of proof cast under Section 70 of the Karnataka Value Added Tax Act, 2003. The dealer claiming ITC has to prove beyond doubt the actual transaction which can be proved by furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgment of taking delivery of goods, tax invoices and payment particulars etc. The genuineness of the transaction has to be proved as the burden to prove the genuineness of transaction would be upon the purchasing dealer. It has been held that mere production of the invoices and/or payment by cheque is not sufficient and cannot be said to be proving the burden as per section 70 of the Karnataka Value Added Tax Act, 2003.
7. From the perusal of Exhibit P-1 impugned assessment order for the assessment year 2017-18 dated 24.05.2022 it is evident that the petitioner’s claim for higher input tax has been denied only on the ground that the said amount was not mentioned in the GSTR 2A. If the seller dealer (supplier) has not remitted the said amount paid by the petitioner to him, the petitioner cannot be held responsible. Whether the petitioner has paid the tax amount and the transactions between the petitioner and seller dealer are genuine are the matter on facts and evidence. The petitioner has to discharge the burden of proof regarding the remittance of tax to the seller dealer by giving evidence as mentioned in the Judgment of the Supreme Court in The State of Karnataka v. M/s. Ecom Gill Coffee Trading Private Limited (supra).
8. In view thereof, I find that the impugned Exhibit P-1 assessment order so far denial of the input tax credit to the petitioner is not sustainable, and the matter is remanded back to the Assessing Officer to give opportunity to the petitioner for his claim for input tax credit. If on examination of the evidence submitted by the petitioner, the assessing officer is satisfied that the claim is bonafide and genuine, the petitioner should be given input tax credit. Merely on the ground that in Form GSTR-2A the said tax is not reflected should not be a sufficient ground to deny the assessee the claim of the input tax credit. The assessing authority is therefore, directed to give an opportunity to the petitioner to give evidence in respect of his claim for input tax credit. The petitioner is directed to appear before the assessing authority within fifteen days with all evidence in his possession to prove his claim for higher claim of input tax credit. After examination of the evidence placed by the petitioner/assessee, the assessing authority will pass a fresh order in accordance with law.
With the above directions the writ petition is finally disposed of.
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(Author can be reached at [email protected])
Author Bio
It has to be proved that seller uploaded invoice document in GSTR1 but it did not appear in GSTR2A due to technical glitches. Otherwise the seller should be booked for tax evasion. Unfortunately there is no system for the buyer to report the GST officials about the non filing of invoice by seller . it so happens that seller filed GSTR1 only after due date so that it will appear only in the GSTR 2A of succeeding month. in such a case the buyer can claim ITC in next month.. In this particular case it is not clear whether non filing or late filing is responsible for the particular incident