Summary: In the case of M/s Anil Rice Mill v. State of Uttar Pradesh [Writ Tax No. 886 of 2023 dated August 14, 2024], the Allahabad High Court determined that tax invoices, e-way bills (EWBs), and goods receipts are inadequate for claiming Input Tax Credit (ITC). The court emphasized that in addition to these documents, detailed evidence such as payment of freight charges, proof of delivery, and toll receipts is crucial to verify the actual physical movement and authenticity of goods transportation. This decision aligns with precedents set in similar cases like State of Karnataka Vs. M/s Ecom Gill Coffee Trading Private Limited and Astha Enterprises v. State of Bihar, where it was established that simply providing tax invoices or EWBs does not suffice for ITC claims. The burden of proof lies with the dealer to substantiate the genuineness of transactions and the actual movement of goods. The ruling underscores that while tax invoices and EWBs are necessary, they alone do not fulfill the requirements of proving ITC eligibility as per Section 16 of the CGST Act, which mandates additional documentation and proof of payment to the government.
Introduction: The Hon’ble Allahabad High Court in the case of M/s Anil Rice Mill v. State of Uttar Pradesh [Writ Tax No. 886 of 2023 dated August 14, 2024] held that without details such as payment of freight charges, proof of goods delivery, and toll receipts to verify “the actual physical movement of goods and the authenticity of transportation,” tax invoices, e-way bills (“EWB”), and payments made through banking channels are insufficient for claiming the benefit of Input Tax Credit (“ITC”).
Facts:
M/s. Anil Rice Mill (“the Petitioner”) is a proprietorship firm, which is engaged in the business of reselling and purchase of peanut, galla and paddy.
The Revenue Department (“the Respondent”) issued a Show Cause Notice (“SCN”) under Section 74 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) for the month of June, July, August and September, 2020-21 to the Petitioner for availing wrong ITC. The Petitioner replied to the SCN, nevertheless, the Respondent passed an Order dated August 24, 2021 and imposed tax on the Petitioner amounting to INR 20, 31, 775/- and penalty of equal amount as well. The Petitioner preferred an appeal against the said order. The appeal was rejected by the Order dated January 31, 2023 (“the Impugned Order”).
Hence, aggrieved by the Impugned Order, the Petitioner has filed the present writ petition.
Issue:
Whether Tax Invoices, E-way bills, and Goods Receipts are sufficient proof to avail ITC?
Held:
The Hon’ble Allahabad High Court in Writ Tax No. 886 of 2023 held as under:
- Relied on the case of State of Karnataka Vs. M/s Ecom Gill Coffee Trading Private Limited [Civil Appeal No. 230 of 2023, decided on March 13, 2023] wherein the Apex Court held that primarily burden of proof for claiming the ITC is upon the dealer to furnish the details of selling dealer, vehicle number, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. to prove and establish the actual physical movement of the goods. Further, submitting tax invoice, e-way bill, GR or payment details is not sufficient.
- Relied on Astha Enterprises v. State of Bihar [(C.W.) 10395 of 2023 dated August 18, 2023] wherein the Hon’ble Patna High Court held that the dealer who claims ITC has to prove beyond doubt, the actual transaction by furnishing the name and address of selling dealer, details of the vehicle delivering the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. It was also held that to sustain a claim of ITC on purchases, the purchasing dealer would have to prove and establish the actual physical movement of the goods and genuineness of transactions, by furnishing the details referred to above and mere production of tax invoices would not be sufficient to claim ITC.
- Relied on, M/s Shiv Trading Vs. State of U.P. and 2 others [Writ Tax No.1421/2022 dated November 28, 2023], wherein the Supreme Court dismissed the writ ad stated that the proceedings initiated under Section 74 of U.P.G.S.T. Act as the petitioner thereof failed to discharge its onus to prove and establish beyond doubt actual transaction of physical movement of goods as well as genuineness of transaction.
- Relied on, Commissioner Commercial Tax Vs. M/s Ramway Foods Ltd. [Sales/Trade Tax Revision No. 26 dated August 23, 2023] wherein the Allahabad High Court held that the primary responsibility of claiming the benefit is upon the dealer to prove and establish the actual physical movement of goods genuineness of transactions, etc. and if the dealer fails to prove the actual physical movement of goods, the benefit cannot be granted.
- Noted that, the scheme of ITC was introduced with an object to avoid cascading effect of tax. The benefit of ITC under the tax statute can be availed only on fulfilment of certain conditions mentioned in section 15 of the CGST Act. Section 16(2) of the CGST Act provides that no registered dealer shall be entitled to the ITC in respect of any supply of goods or services or both to him unless the conditions mentioned therein are fulfilled. The determination of tax not paid or short paid or erroneously refunded or ITC wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts empowers to issue notice that tax has not been paid or short paid or erroneously refunded or ITC has wrongly been availed or utilized by any reason or wilful misstatement or suppression of fact. Further, upon adjudication an Assessee is required to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice. In the event of wrong availment of ITC, the proceedings can be initiated against the registered person or registered dealer but at the same time, restrictions have been imposed upon the authorities that without putting notice to the dealer, no adjudication proceeding can be initiated.
- Held that, the Petitioner had only brought on record the tax invoices, EWBs, and payment through banking channel which does not alone establish the actual physical movement of goods and genuineness of transportation and did not bring on record proof of filing of FORM GSTR 2 A. Hence, the writ petition was dismissed.
Our Comments:
Section 16 of the CGST Act discusses “Eligibility and conditions for taking input tax credit”. Clause (2) of Section 16 of the CGST Act further discusses the conditions to avail ITC by a registered person who is entitled to the credit of any input tax in respect of any supply of goods or services or both to him, which are as follows:
a. Recipient is in possession of a tax invoice or debit note issued by a supplier registered under GST Act, or such other tax paying documents as may be prescribed.
b. Supplier has reported the invoices or debit notes referred to in the statement of outward supplies and such details have been communicated to the recipient in FORM GSTR-2B.
c. Recipient has received the goods and services or both.
d. The details of ITC in respect of the said supply communicated to such registered person under section 38 have not been restricted.
e. Subject to the provisions of Section 41 of the CGST Act, the tax charged in respect of such supply has been actually paid by the supplier to the government, either in cash or through utilisation of ITC admissible in respect of the said supply.
f. Recipient has furnished the return under Section 39 of the CGST Act.
In a Pari Materia case, M/s. Malik Traders v. State of Uttar Pradesh and Ors. [Writ Tax No. 1237 of 2021 dated October 18, 2023], Hon’ble Allahabad High Court also held that the details of the Tax Invoice, E-Way bill, and Goods Receipt are not sufficient to prove the genuineness of the transaction beyond a reasonable doubt, to avail ITC. The recipient of purchased goods must provide essential information, including vehicle numbers used for transporting the goods, payment of freight charge, and acknowledgement of receipt, in order to substantiate the genuine physical movement of goods for availment of ITC.
The above provision also applies to previous sellers also. In the case of Vimal Alloys Pvt. Ltd. [Order No. AAR/GST/PB/31 dated February 03, 2023] wherein the AAR, Punjab held that as per section 16(2)(c) of the CGST Act, tax charged in respect of supply is required to be actually paid to Government in order to avail ITC. ITC cannot be availed/claimed if the seller or preceding seller has failed to discharge GST on such supply. Since the preceding seller had failed to discharge GST on the supply, the Applicant was not eligible to avail ITC on such supply.
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