Burden of proving ITC genuineness upon dealer; Upholds penalty for fake invoices

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HC upholds penalty u/s 70(2) of Karnataka VAT Act where assessee availed ITC on the basis of fake and false invoices of non-existent selling dealers; Rejects assessee’s claim that since Assessing Authority had undertaken process of cross-examination of selling dealer produced before him, burden of proving the genuineness thereof stood discharged by assessee and consequently, shifted onto Revenue; Explains that, “the words ‘knowingly issues or produces a false tax invoice’ does not shift the burden on the Revenue, merely because the dealer claiming
such input tax credit claims that he is a bona fide purchaser and knowingly he had not produced a false and fake invoice”;

Relies on Division Bench decision in Microqual Techno Pvt. Ltd., while finding that at least 2 of the dealers from whom ITC invoices were claimed were for consideration before the Bench and thus, same or similar bogus selling dealers registered without actual dealers existing appeared to be forming the chain of producing false and fake invoices, on the basis of which, ITC was claimed by purchasing dealers; Accordingly, remarks that, “A dealer entering into a genuine transaction of purchase always knows the existence and identity of selling dealer. Essentially, two parties must actually exist to enter into a valid contract of sale or purchase and therefore, it cannot be said, in these circumstances, that the Appellant-Assessee did not ‘knowingly’ produce the tax invoices which were false or fake”

Citation: TS-273-HC-2018(KAR)-VAT