Genuine Transactions with suppliers whose GST Registration cancelled: Calcutta HC allows GST ITC to Assessee

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The Calcutta High Court bench of Justice Md. Nizamuddin has held that the Input Tax Credit (ITC) cannot be denied on genuine transactions with suppliers whose GST registration was cancelled after the transaction.

The petitioners/assessee were aggrieved by the action of the department denying the benefit of the Input Tax Credit (ITC). The ITC was denied the purchase of the goods in question from the suppliers and asked the petitioners to pay the penalty and interest under the provisions of the GST Act. The penalty and interest were demanded on the ground that the registration of the suppliers in question had already been cancelled with retrospective effect, covering the transaction period in question.

The petitioner ​​contended that the transactions were genuine and valid. The petitioners, with their due diligence, have verified the genuineness and identity of the suppliers. The names of those suppliers as registered taxable persons were available at the government portal, showing their registrations as valid and existing at the time of transactions.

The petitioners submitted that they have limitations in ascertaining the validity and genuineness of the suppliers in question and they have done whatever possible in this regard. When the names of the suppliers as registered taxable persons were already available on the government record and in the government portal at the relevant period of transaction, petitioners could not be faulted if the suppliers appeared to be fake later on.

The petitioners submitted that they had paid the amount of purchases in question as well as tax on the same note in cash and that all transactions were made through banks. The petitioner was helpless if, at some point of time after the transactions were over, the respondents concerned found on enquiries that the suppliers (RTP) were fake and bogus. On this basis, petitioners could not be penalised unless the department established with concrete materials that the transactions in question were the outcome of any collusion between the petitioners/purchasers and the suppliers in question.

The petitioners contended that all the purchasers in question, invoices-wise, were available on the GST portal on form GSTR-2A, which is a matter of record.

“It cannot be said that there was any failure on the part of the petitioners in compliance with any obligation required under the statute before entering into the transactions in question and that there was no verification of the genuineness of the suppliers in question by the petitioner during the relevant period,” the court observed.

The court directed the department to dispose of the case of the petitioner by passing a reasoned and speaking order after giving an effective opportunity of hearing to the petitioners, within eight weeks.

Case Title: Sanchita Kundu & Anr. Vs. The Assistant Commissioner of State Tax, Bureau of Investigation, South Bengal & Ors.

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