To Claim ITC on Purchases, Physical Movement of the Goods and Genuineness of Transaction is Necessary, Mere Production of Tax Invoice is Not Sufficient—Akhilesh Kumar Shah

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The Tax Publishers GST--Input Tax Credit To Claim ITC on Purchases, Physical Movement of the Goods and Genuineness of Transaction is Necessary, Mere Production of Tax Invoice is Not Sufficient Akhilesh Kumar Shah The learned author examines an issue as to whether when a dealer claiming Input Tax Credit (for short "ITC") claims that he is a bona fide purchaser, it is not enough. The ultimate burden of proving the correctness of ITC remains upon the dealer claiming such ITC. 1. Introduction A recent case is illustrative one in respect of the topic. In Anil Rice Mill vs State of UP and Ors (Writ Tax No 886 of 2023) decided by Allahabad High Court on 14-8-2024, assessee after due purchase of goods through proper invoice, had made the payment through banking channel and on the basis that the selling dealer had not shown the said purchases in its returns or not deposited tax, the action could not be taken against the assessee. Assessee being a purchaser, cleared the bill, in which tax was charged and the benefit of ITC cannot legally be denied. 2. Assessee's submissions The assessee submitted that ITC under the GST regime was brought with intention to avoid cascading effect and once the tax had been charged on the bill, which was paid by the assessee through banking channel, the benefit of ITC could not legally be denied. He submitted that the assessee had rightly discharged his liability of tax by paying the tax charged on the bills raised by the selling dealer and if the selling dealer had not deposited the tax so charged from the assessee, the selling dealer should be penalized and not the assessee. In the event, amount of ITC, rightly claimed by the assessee, was being recovered that would amount to double taxation, which was not the spirit of GST regime. The assessee placed reliance on the following judgments: SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

GST--Input Tax Credit

To Claim ITC on Purchases, Physical Movement of the Goods and Genuineness of Transaction is Necessary, Mere Production of Tax Invoice is Not Sufficient

Akhilesh Kumar Shah

The learned author examines an issue as to whether when a dealer claiming Input Tax Credit (for short "ITC") claims that he is a bona fide purchaser, it is not enough. The ultimate burden of proving the correctness of ITC remains upon the dealer claiming such ITC.

1. Introduction

A recent case is illustrative one in respect of the topic. In Anil Rice Mill vs State of UP and Ors (Writ Tax No 886 of 2023) decided by Allahabad High Court on 14-8-2024, assessee after due purchase of goods through proper invoice, had made the payment through banking channel and on the basis that the selling dealer had not shown the said purchases in its returns or not deposited tax, the action could not be taken against the assessee. Assessee being a purchaser, cleared the bill, in which tax was charged and the benefit of ITC cannot legally be denied.

2. Assessee's submissions

The assessee submitted that ITC under the GST regime was brought with intention to avoid cascading effect and once the tax had been charged on the bill, which was paid by the assessee through banking channel, the benefit of ITC could not legally be denied. He submitted that the assessee had rightly discharged his liability of tax by paying the tax charged on the bills raised by the selling dealer and if the selling dealer had not deposited the tax so charged from the assessee, the selling dealer should be penalized and not the assessee. In the event, amount of ITC, rightly claimed by the assessee, was being recovered that would amount to double taxation, which was not the spirit of GST regime.

The assessee placed reliance on the following judgments: