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DENIAL OF ITC (INPUT TAX CREDIT) ON THE RETROSPECTIVE CANCELLATION OF SUPPLIERS REGISTRATION

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Last Updated on June 27, 2023 by Kanakkupillai

Denial of ITC

In this case, the issue is whether a registered taxable person can claim Input Tax Credit (ITC) when the supplier’s GST registration has been retrospectively cancelled. Despite the petitioner submitting all the necessary documents and payment proofs, the Calcutta High Court passed the decision on the case. This article aims to provide an overview of the basic details and facts of the case.

FACTS OF THE CASE:

The petitioner claimed an input tax credit for the inward supplies as a registered taxable person. The petitioner submitted all relevant documents, including invoices, bank statements, e-way bills, and transportation bill services, to demonstrate the payment made to the supplier. Importantly, the supplier’s GST registration was valid on the transaction date.

CONTENTION OF THE APPLICANT:

The applicant argues that the authorities did not properly verify the documents provided and unjustly cancelled the refund claim for the input tax credit. The applicant received services from the supplier and made the payment without any hindrance, having diligently examined all the documents required by law. Therefore, it is unfair for the authorities to deny the refund claim that the applicant should rightfully acquire. It should be noted that the supplier’s name was marked as registered in the government portal at the time of the transaction.

CONTENTION OF THE DEPARTMENT:

The department contends that the supplier is fake and non-existent, and all the documents submitted by the supplier are fake as well. They argue that the petitioner’s claimed input tax credit is based on irrelevant documents. Furthermore, they assert that it was the petitioner’s responsibility to verify whether the supplier was a registered taxable person, which the petitioner failed to do. Consequently, the department holds that the petitioner must face the consequences.

DECISION OF THE HONOURABLE HIGH COURT:

The high court concluded that the petitioner entered into a contract with the supplier based on considering all the relevant documents submitted by the supplier. Additionally, the documents were approved at the time of the transaction, and the supplier’s name was registered on the government portal. The high court further emphasized that the department did not adequately consider the documents relied upon by the petitioner when entering into the contract.

a) The impugned order has been set aside.

b) The department has been directed to hear the petitioner’s grievances.

c) The department must allow the petitioner to speak by passing a reasoned and speaking order. This order must be issued within 8 weeks of receiving the receipt of the order.

CONCLUSION

The denial of Input Tax Credit on the retrospective cancellation of the supplier’s registration is an unjust decision for the petitioner. Once again, the high court has demonstrated its commitment to protecting the rights of income taxpayers.

Related Services

GST Return Filing Online in India

Cancelling a GST registration

G.Durghasree B.A.B.L (Hons)

G Durghasree B.A.B.L (Hons) is a registered trademark attorney with extensive experience as an Advocate for a period of 8 years. She possesses expertise in trademark law, including trademark filing and trademark hearings. Additionally, she is skilled in contract drafting and reviewing, providing legal advice and opinions, particularly in the areas of Company Law, Insolvency and Bankruptcy Code (IBC), and Goods and Service Tax Law (GST). Her experience encompasses both litigation and non-litigation aspects of these laws.