Calcutta High Court Sets Aside ITC Denial as No Fault Found on Purchaser’s Part

The Calcutta High Court, in one of its important judgememt, set aside orders denying ITC as based on the records or further checks, it cannot be said that it was the petitioner’s fault in complying with the legal obligation.

The GST department had denied the petitioner Sanchita Kundu & Anr, from availing the benefit of Input Tax Credit (ITC) through the impugned order dated 27.12.2021, saying that the GST registration of the supplier had been cancelled with retrospective effect covering the transaction period in question. The petitioner was directed to pay a penalty and interest under the GST Act. Therefore, the petitioner approached the Calcutta High Court challenging this order along with two other impugned orders dated 29.03.2022 and 30.03.2022, being Annexure P-10 to the writ petition.

The petitioner argued that the transactions are valid and genuine based on the supporting documents required under the law. The petitioner also argued that the identities of the suppliers were available at the government portal. This showed that the registration was valid. They argued that the petitioner should not be blamed if the suppliers were later found to be fake. The petitioner also contended that they cannot be penalised unless the GST authority submits solid proof that shows that the petitioner and the supplier were connected with each other. It was also submitted that all purchase details were available invoice-wise in the GST portal in GSTR-2A.

The Calcutta High Court observed that, as per the records or further checks, it cannot be claimed that it was the petitioner’s fault in complying with the legal obligation. The court said that it cannot be claimed that there was no verification of the supplier’s genuineness at the relevant time. Therefore, the court set aside the impugned orders and remanded the cases to the respondent officer for fresh consideration. The officer was directed to:

• Consider the supporting documents submitted by the petitioners.
• Check whether payments for the purchases, along with GST were actually made to the suppliers or not.
• Consider whether the transactions were done before or after the cancellation of the suppliers’ registration.
• Consider the petitioners’ compliance with legal obligations in verifying the identity of the suppliers.

The court said that if the officer there said that the transactions were not fake, were supported by valid documents, were made before cancellation of the suppliers’ registration, and that the facts were similar to other judgements, the petitioners should be granted the benefit of ITC. The officer was also directed to pass a valid and speaking order after giving an opportunity of hearing to the petitioners, within eight weeks from the date of communication of the Court’s order. The court also set aside the impugned orders in Annexure P-10.