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Issue Id: - 118525
Dated: 15-5-2023

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received intimation u/s 61 stating that the tax payer in june 2021 fraudulently availed ITC without receipt of goods. reason cited is that e way bill has not been generated by the supplier. however the facts are goods is received by the tax payer and invoices are reflected in GSTR 2A. payment has aslo been paid against the purchase invoices. is it e way bill mandatory to claim ITC.

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1 Dated: 15-5-2023
By:- Amit Agrawal

While E-way bill is not mandatory to claim ITC against goods, one of conditions to be fulfilled for availing ITC is the receipt of goods (i.e. Section 16 (2) (b)). And as per Section 155, where any person claims that he is eligible for input tax credit under this Act, the burden of proving such claim shall lie on such person.

So, person availing ITC needs to prove that subject goods are actually received by him with corroborative evidences.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

2 Dated: 15-5-2023
By:- Alkesh Jani


Please refer to issue Id No. 118473. It may be of your help.


3 Dated: 15-5-2023
By:- Padmanathan Kollengode

E-way bill is not the only evidence that can be adduced to prove the actual movement of goods. Other documents such as weighbridge receipts, transportation charges paid, FASTag/ toll charges receipt, loading/unloading receipt, statement of driver, etc can be produced to prove the actual movement. In one case, CCTV footage were produced and it was ultimately accepted by the department.

4 Dated: 20-5-2023
By:- Shilpi Jain

Please go through this article

Merely because e way bill is not generated does not prove that goods were not received. There are other documents and evidences / transactions that can prove receipt of goods. Good case to fight.

Input tax credit - Burden of proof

By CA Shilpi Jain, Partner & CA Vikram Katariya, HNA & Co. LLP

THE Government has realized that claim of bogus input tax credit (ITC) and claim of refund of taxes never paid to the Revenue are the two major reasons for huge leakages of revenue.

The provisions under GST require taxpayers to fulfill certain conditions to be eligible for credit.

Section 16(2) of the CGST Act, 2017 is relevant in this regard and which requires:

  • Possession of tax invoice, debit note or any other prescribed document,
  • Receipt of the goods or services,
  • Appearance of the invoices in GSTR-2B i.e. requiring the supplier to file details of the invoice in his Form GSTR-1,
  • Payment of tax to the Exchequer, and
  • Filing of Form GSTR-3B by the recipient.

Under GST there have been quite a few decisions which have held that the recipient should not be affected by the fact that the supplier has received bogus bills. One such decision is in the case of M/s. Balaji Exim 2023 (3) TMI 529 - DELHI HIGH COURT where the petitioner had purchased goods from a supplier, against whom investigation was initiated for receiving fake invoices. The High Court of Delhi held that:

a. Refund was rejected on a mere apprehension that its supplier had issued fake invoices. There is no conclusive finding on the basis of any cogent material that the invoices issued by the supplier to the petitioner / recipient are fake invoices.

b. There is no allegation that the goods in question were not exported overseas.

c. It is not correct to reject refund merely because of suspicion without any cogent material. There is no dispute that goods have been exported; the invoices in respect of which ITC is claimed were raised by a registered dealer and there is no allegation that the petitioner / recipient has not paid the invoice amount, which include taxes.

d. Allegations of any fake credit availed by the supplier cannot be a ground for rejecting the petitioner's/recipient's refund applications unless it is established that the petitioner has not received the goods or paid for them.

e. If the department is able to find material to establish the allegations regarding non-supply of any goods by the supplier to the petitioner, they can initiate action as may be required under the law.

Also, in the case of Bhagyanagar Copper Pvt Ltd 2021 (11) TMI 152 - TELANGANA HIGH COURT the Telangana High Court held that the provisions of the CGST Act and the IGST Act do not mandate the petitioner to verify the genuineness of the suppliers of its supplier, inasmuch as enough safeguards/mechanism are provided under the Act to recover the taxes, if not paid or wrong credit is availed by the petitioner's supplier or supplier's supplier.

In certain other cases (some listed below) it has been held that the bonafide recipient should not be made to suffer due to supplier's default -

a. New Nalbandh Traders - 2022 (3) TMI 908 - GUJARAT HIGH COURT

b. LGW Industries Limited & Ors. Vs. Union of India & Ors 2021 (12) TMI 834 - CALCUTTA HIGH COURT

Thus, an important aspect to be noted is that any allegation of fraud must necessarily be proved by the person who levels such an allegation. Where, however, the department succeeds in prima-facie proving its allegation of fraud, the onus would shift to the assessee to prove the genuineness of the transaction, as was held by the High Court in the case of SMI Electrowire Pvt. Ltd. - 2015 (2) TMI 185 - PUNJAB & HARYANA HIGH COURT

There are many other cases under the CENVAT regime where it has been held that mere suspicion cannot lead to denial of credit. There has to be sufficient evidence to prove this.

In one recent decision under the KVAT Act, 2003, in the case of Ecom Gill Coffee Trading Private Limited 2023 (3) TMI 533 - SUPREME COURT the Supreme Court had held that the burden of proving the correctness of ITC claim lies with the dealer claiming such credit. This burden cannot be shifted onto the Revenue. Mere production of invoices or payment by cheque is not sufficient to discharge the burden of proof cast under section 70 of the said Act.

The Court further stated that a dealer claiming ITC on purchases must prove and establish the actual physical movement of goods, genuineness of transactions, name and address of the selling dealer, details of the vehicle delivering the goods, payment of freight charges, acknowledgement of delivery, etc.

This decision has been rendered in spite of the various favourable decisions in the past under the erstwhile indirect tax laws which held that bonafide dealers should not be denied the benefit of credit, even where the seller has not deposited the taxes with the Revenue; that it is for the Department to recover the taxes from the selling dealer. Some of the cases are:

a. Arise India Limited vs. Commissioner of Trade and Taxes, Delhi - 2018 (1) TMI 555 - SC ORDER

b. M/s Tarapore and Company Jamshedpur v. State of Jharkhand - 2020 (1) TMI 414 - JHARKHAND HIGH COURT

c. M/s. Mahalaxmi Cotton Ginning Pressing and Oil Industries, Kolhapur Vs. The State of Maharashtra & ORS - 2012 (5) TMI 152 - BOMBAY HIGH COURT

Also, in the 28th GST Council meeting held on 04-08-2018 in New Delhi it was stated as follows:

“18……………. There would be no automatic reversal of input tax credit at the recipient's end where tax had not been paid by the supplier. Revenue administration shall first try to recover the tax from the seller and only in some exceptional circumstances like missing dealer, shell companies, closure of business by the supplier, the input tax credit shall be recovered from the recipient by following the due process of serving of notice and personal hearing.

Under GST, the provision of s.155 would be relevant to take note of:

155. Where any person claims that he is eligible for input tax credit under this Act, the burden of proving such claim shall lie on such person.

However, an aspect to be remembered is that any person is required to reasonably establish the eligibility of credit. Generally, it is not expected or required that he would have to prove with all possible evidence and beyond doubt that the goods were actually received by him. In the normal course, certain documentary evidence should be sufficient to prove the genuineness of the transaction. These could be documents like transport documents (like LR) to indicate movement of goods, stock and production records to show that goods were purchased, processed and cleared for sale, etc. which can to a reasonable extent prove that the goods were actually received.

Also, in the past there were cases which have held that the recipient has to take reasonable steps to satisfy himself about the existence, identity and address of the supplier/manufacturer. The fact that the suppliers/manufacturers are a Central Excise registered manufacturing unit and there is no dispute regarding existence and identity of such unit, same was considered as a reasonable care taken by the recipient.

Keeping the above in mind, mere reference to the decision of the Supreme Court in the case of Ecom Grill supra without evaluating the intention and the consistent view taken by the Courts, would be against the very spirit of allowing credit to business. The ideology of allowing credit is to avoid cascading effect and allowing on good faith (self-assessment model) and not on an assumption that all credits would be looked into through the lens of suspicion.

In our view, once the conditions provided under section 16 of the CGST Act are fulfilled and established with reasonable evidence, the onus would be on the Department to provide positive evidence to establish the contrary (to prove fake/bogus credits). It is only when the Department can establish such suspicion with evidence, the assessee would be required to defend their claim of credit with additional records and evidences.

[The views expressed are strictly personal.]

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