Form GST APL-01

[See Rule 108(1)]

Appeal to Appellate Authority 

In the Court of Additional/Joint/Special Commissioner (Appeal) …., Delhi Goods and Services Tax (GST) 

 M/s XXX 

Through their Partner Mr. XXX

(Appellant)

Versus

State Tax Officer Class-II/AVATO

Ward-72, Zone-4, Delhi GST

(Respondent)

 

1	GSTIN/TEMPORARY ID/UIN	07A….W
2	Legal name of the appellant	XXX
3	TRADE NAME, IF ANY	M/s XXX
4	Address	Plot No. 1/1, Shakarpur , Laxmi Nagar, East Delhi, Delhi-110092
5	Order No &Date	ZD…..12T & 25th-Dec-2023
6	Designation of the officer passing the order appealed against	Sales Tax Officer Class II/ AVATO Ward 72:Zone 4:Delhi
7	Date of communication of the order appealed against	25th-Dec-2023
8	Name of the authorized representative	XXX
9	Details of the case under dispute	Assessment/Scrutiny of Returns
9(1)	Brief issue of the case under dispute
9(2)	Description and classification of goods/ services in dispute	N/A
9(3)	Period of dispute	July 2017 – Mar 2018
9(4)	Amount under dispute:	25,00,000/-
10	Whether the appellant wishes to be heard in person	Yes
11	Statement of facts	As per Annexure A
12	Grounds of appeal	As per Annexure B
13	Prayer	As per grounds of appeal

14. Amount of demand created, admitted and disputed –

Particular ofdemand /refund	Particulars		CGST	SGST	IGST	Cess	Total Amount	Overall total Amount
	Amount of demand created (A)	a) Tax/ Cess	5,00,000	5,00,000	0	0	10,00,000	25,00,000
		b) Interest	5,00,000	5,00,000	0	0	10,00,000
		c) Penalty	2,50,000	2,50,000	0	0	5,00,000
		d) Fees	0	0	0	0	0
		e) Other charges	0	0	0	0	0
	Amount of demand admitted (B)	a) Tax/ Cess	0	0	0	0	0
		b) Interest	0	0	0	0	0
		c) Penalty	0	0	0	0	0
		d) Fees	0	0	0	0	0
		e) Other charges	0	0	0	0	0
	Amount of demand disputed (C)	a) Tax/ Cess	0	0	0	0	0	0
		b) Interest	0	0	0	0	0
		c) Penalty	0	0	0	0	0
		d) Fees	0	0	0	0	0
		e) Other charges	0	0	0	0	0

15. Details of payment of admitted amount and pre-deposit: – Rs.0 /-

(a) Details of payment required

Particulars		CGST	SGST	IGST	Cess	Total Amount
a)     Admitted Amount	Tax/Cess	0	0	0	0	0
	Interest	0	0	0	0	0
	Penalty	0	0	0	0	0
	Fees	0	0	0	0	0
	Other Charge	0	0	0	0	0
b)     Pre Deposit (10% of disputed Amount)	Tax/Cess	0	0	0	0	0

(b) Details of payment of admitted amount and pre-deposit (pre-deposit 10.00% of the disputed tax and cess):

(b.1) Detail of payment of admitted amount – NIL

S. No.	Description	Paid through cash/credit ledger	Debit Entry No	Amount of tax paid
				CGST	SGST	IGST	Cess
1	2	3	4	5	6	7	8
1	IGST	Cash Ledger	0	0	0	0	0
		Credit Ledger	0	0	0	0	0
2	CGST	Cash Ledger	0	0	0	0	0
		Credit Ledger	0	0	0	0	0
3	SGST	Cash Ledger	0	0	0	0	0
		Credit Ledger	0	0	0	0	0
4	Cess	Cash Ledger	0	0	0	0	0
		Credit Ledger	0	0	0	0	0

(b.2) Detail of payment of pre deposit (pre-deposited 10.00% of the disputed tax and cess) –

S. No.	Description	Paid through cash/credit ledger	Debit Entry No	Amount of tax paid
				IGST	SGST	IGST	Cess
1	2	3	4	5	6	7	8
1	IGST	Cash Ledger	0	0	0	0	0
		Credit Ledger	0	0	0	0	0
2	CGST	Cash Ledger	0	0	0	0	0
		Credit Ledger	0	0	0	0	0
3	SGST	Cash Ledger	0	0	0	0	0
		Credit Ledger	0	0	0	0	0
4	Cess	Cash Ledger	0	0	0	0	0
		Credit Ledger	0	0	0	0	0

(c) Interest, penalty, late fee and any other amount payable and paid;

S. No.	Description	Amount Payable				Debit Entry No	Amount Paid
		IGST	CGST	SGST	Cess		IGST	CGST	SGST	Cess
1	2	3	4	5	6	7	8	9	10	11
1	Interest	0	0	0	0	NA	0	0	0	0
2	Penalty	0	0	0	0	0	0	0	0	0
3	Late fees	0	0	0	0	NA	0	0	0	0
4	Others	0	0	0	0	NA	0	0	0	0

16	Whether appeal is being filed after the prescribed period	Yes
17	If “Yes” in item 16
17(a)	Period of delay
17(b)	Reasons for delay

Verification

I XXX, the Partner of M/s XXX  hereby solemnly affirm and declare that the information given here in above is true and correct to the best of my knowledge and belief and nothing has been concealed there from.

Thanks & Regards

For M/s XXX

Annexure A: Statement of Facts

1.   Statement of Facts

• We, M/s XXX  hereby is filing present appeal against the impugned order which was issued under Section 74 vide Order No. ZD….L on dated 25-12-2023, for the Tax Period 2017-18, order is enclosed as Annexure-1.

• The appellant has been served a Show Cause Notice (hereinafter referred as SCN) in Form DRC 01 and Assistant Commissioner made an allegation that “Availed Inadmissible and Excess ITC” Reference Number of SCN is ZD,,,12T, on dated 23^rd August 2023 under section 73 of Delhi/State Goods and Service Tax Act 2017.

• On 23.09.2023, the Sales Tax Officer Class II, Delhi Charge issued a notice in the Form GST DRC-01 through GST Portal which have raised the demand of the Tax and other dues total amounting Rs.25,00,000.00/-, required to be paid by the firm.

• In the form of a query, they have brought to our attention a noted incongruity, wherein a perceptible discrepancy has been identified between the Input Tax Credit (ITC) as reported in the Goods and Services Tax Return (GSTR-3B) and the corresponding entries in the Table 8A of GSTR-09 for the Financial Year 2017-2018.

• In addition to the foregoing, they have raised a specific inquiry concerning the Input Tax Credit (ITC) claimed from the Cancelled Dealers, Return defaulters & tax non payers.

• Further an Order dated 27-12-2023 under section 73 was issued adding the Penalty of amount Rs.5,00,00,/- to the tax dues which makes the Total Liability of Rs.25,00,000.00/- 

Annexure B: Grounds of Appeal

2.   Grounds of Appeal

• We M/S XXX , a registered person (herein after referred as RP) having registered address at Plot No. 1/1, Shakarpur , Laxmi Nagar, East Delhi, Delhi-110092, with GSTIN: 07A…..1ZW. We have a GST Registration w.e.f., 1^st July 2017. We are engaged in the business of supplying “Cement, Pebbles, Broken Stone, Natural Sand of all kind and all other Building Material” with Primary HSN Code is 2517 and 6810.
• We are engaged in the business of supplying “Articles of cement, of concrete or of artificial Stone, whether or not reinforced other articles, Pebbles gravel broken crushed stone”.
• The GSTR 3B and GSTR 2A exhibit no discernible distinction; throughout the year, we’ve claimed excess Input Tax Credit (ITC) but failed to utilize the corresponding amount, opting to reverse the surplus in March 2018. The disparity highlighted in the notice lacks accuracy. Upon scrutinizing the ITC records in GSTR 2A and GSTR 3B, it becomes apparent that while GSTR 2A indicates an ITC of 22,25,977.77 we only claimed Rs. 22,03,581.93 in GSTR 3B. Therefore, the allegation of an excessive claim appears unfounded.
• That transactional data was duly reflected in the Goods and Services Tax Return (GSTR) 2A during the relevant months. However, it has come to light that the registration of ABC. was subsequently cancelled suo-motu, retrospectively effective from the 1^st July 2017. This retrospective cancellation raises considerations regarding the eligibility and appropriateness of the initially claimed ITC in accordance with the revised status of the supplier.
• Consequently, the retroactive cancellation of registration after the supply occurred is deemed inappropriate for maintaining the eligibility of the initially claimed ITC, aligning with the revised status of the supplier. For that the Assistant Commissioner, Delhi Charge sent an email which does not belong to the appellant and thus, there is gross violation of the principles of natural justice.
• For that the appellant’s claim of ITC in the GSTR-3B is correct, proper and genuine and the appellant has all documents in support of the claim and thus, disallowance of ITC is not sustainable in the eyes of law.
• For that the demand is bad, illegal and disputed and thus, the recovery proceeding is also liable to set aside.
• For that the Ld. Adjudicating Authority failed to follow guideline provided by the Hon’ble High Courts and Supreme Courts through several verdicts in this regard. The appellant relied upon those and craves leave to produce at the time of hearing.

Provision related to the Case

As per Section 16: Eligibility and conditions for taking input tax credit.-

1. Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.

2. Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,-

1. he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;

2. the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37;

3. he has received the goods or services or both.

Explanation.– For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services

a. where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

b. where the services are provided by the supplier to any person on the direction of and on account of such registered person;

ba. the details of input tax credit in respect of the said supply communicated to such registered person under section 38 has not been restricted;

c. subject to the provisions of 4[section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and

d. he has furnished the return under section 39:

Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment:

Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed:

Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon.

• Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income tax Act, 1961 (43 of 1961), the input tax credit on the said tax component shall not be allowed.
• A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the 6[thirtieth day of November] following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.

Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019.

As per Section 61 of CGST Act 2017: Scrutiny of returns

1. The proper officer may scrutinize the return and related particulars furnished by the registered person to verify the correctness of the return and inform him of the discrepancies noticed, if any, in such manner as may be prescribed and seek his explanation thereto

2. In case the explanation is found acceptable, the registered person shall be informed accordingly, and no further action shall be taken in this regard.

3. In case no satisfactory explanation is furnished within a period of thirty days of being informed by the proper officer or such further period as may be permitted by him or where the registered person, after accepting the discrepancies, fails to take the corrective measure in his return for the month in which the discrepancy is accepted, the proper officer may initiate appropriate action including those under section 65 or section 66 or section 67, or proceed to determine the tax and other dues under section 73 or section 74.

As per Section 73. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any willful-misstatement or suppression of facts.-

1. Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50and a penalty leviable under the provisions of this Act or the rules made thereunder.

2. The proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order.

3. Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for such periods other than those covered under sub-section (1), on the person chargeable with tax.

4. The service of such statement shall be deemed to be service of notice on such person under sub-section (1), subject to the condition that the grounds relied upon for such tax periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice.

5. The person chargeable with tax may, before service of notice under sub-section (1) or, as the case may be, the statement under sub-section (3), pay the amount of tax along with interest payable thereon under section 50 on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.

6. The proper officer, on receipt of such information, shall not serve any notice under sub-section (1) or, as the case may be, the statement under sub-section (3), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder.

7. Where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable.

8. Where any person chargeable with tax under sub-section (1) or sub-section (3) pays the said tax along with interest payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded.

9. The proper officer shall, after considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty equivalent to ten per cent. of tax or ten thousand rupees, whichever is higher, due from such person and issue an order.

10. The proper officer shall issue the order under sub-section (9) within three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund.

11. Notwithstanding anything contained in sub-section (6) or sub-section (8), penalty under sub-section (9) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax.

3. Our Declaration and working

• With respect to the first query, you have highlighted an observed incongruity wherein a discernible variance exists disparity between the Input Tax Credit (ITC) figures reported in the Goods and Services Tax Return GSTR-3B and Table 8A of GSTR-09 is identified as a variance amounting to Rs. 5,00,000 in both Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST). Upon a meticulous examination of the detailed GSTR 3B, it has been discerned that there was an initial assertion of additional ITC throughout the financial year, which was subsequently rectified through the reversal of the surplus amount in the GSTR 3B filed for the month of March 2018. This corrective measure was undertaken to ensure accuracy and compliance with the prescribed guidelines. (For your reference we have annexed the GSTR 3B and GSTR 2A in annexure).

We would place reliance on the decision of Honorable Kerala High Court in the case of Mina Bazar vs State Tax Officer-I [WP (C) 30670/2023, 19.09.2023] as cited in

Facts of the Case:

The assessment order was passed on the grounds that the assessee has been said to have availed the input tax credit higher than the amount reflected in GSTR-2A. Basically such reduction was based on difference of ITC between GSTR-2A and GSTR-3B. Assessment Order denying such credit was passed on 20-Aug-2022 and Recovery Notice was issued on 24-Jul-2023.

Aggrieved with the Demand Order and Recovery Notice the Petitioner approached the High Court. The Petitioner relied upon various judgments which are as follows:

1. Diya Agencies vs The State Tax Officer (Kerala HC) 

2. Suncraft Energy Pvt. Ltd. Vs. The Assistant Commissioner, State Tax (Calcutta HC) cited in

3. State of Karnataka Vs. Ecom Gill Coffee Trading (Supreme Court) cited in

Kerala High Court directed the Assessing Authority to pass fresh orders in accordance with the law. Accordingly, the petition was allowed.

Similarly, Honorable Kerala High Court in the case of Heena Medicals Vs. State Tax Officer [W.P. (C) No. 30660 of 2023; 19.09.2023] as cited in   has held that Input Tax Credit cannot be denied merely based on discrepancy between GSTR 2A and 3B.

We would rely on the decision of Honorable Kerala High Court in the case of Diya Agencies Vs. State Tax Officer [WP(C) No. 29769 of 2023 dated September 12, 2023] as cited in  held that, if the taxpayer is able to prove that tax amount is paid to the seller and the Input Tax Credit claim is bonafide so the Input Tax Credit cannot be denied merely on non-reflection of transaction in GSTR-2A.

We would also place reliance on the decision of Hon’ble Supreme Court in the case of State of Karnataka v. M/s. Ecom Gill Coffee Trading Pvt. Ltd. as cited in [Civil Appeal No. 230 of 2023 dated 13.03.2023] has quashed and set aside the order passed by the Hon’ble Karnataka High Court on the grounds that until the purchasing dealer discharges the burden of proof under Section 70 of the Karnataka Value Added Tax Act, 2003 (“the KVAT Act”), and proves the genuineness of the transaction/purchase and sale by producing the relevant materials, such as name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc, such purchasing dealer shall not be entitled to Input Tax Credit (“ITC”). Restored the order passed by the Revenue Department.

We would also place reliance on the decision of Hon’ble Supreme Court in the case of In instant case, Assessing officer as well as first appellate authority denied ITC under KVAT as genuineness of purchase transaction was doubted on ground that selling dealers were either de-registered or had filed nil returns or had denied sale – In appeal, Tribunal allowed ITC by holding that payment of purchased goods was made under account payee cheques against invoice and that purchasing dealer should not suffer due to default of seller – High Court under impugned revision order, affirmed Tribunal order – HELD : Section 70 of KVAT clearly stipulated that burden of proof was on purchasing assessee to establish genuineness of transaction against which ITC had been claimed – Merely claiming to be abonafide purchaser was not enough and sufficient to avail ITC – This burden of proof could not be shifted on revenue by mere production of invoices or fact of having made payments by account payee cheque to seller – Purchase transaction was required to be proved beyond doubt by furnishing other details and documents viz. name and address of selling dealer, details of vehicle which had delivered goods, payment of freight charges, acknowledgement of taking delivery of goods etc.- Aforesaid information was required in addition to tax invoices and payment particulars for establishing actual physical movement and receipt of goods – Intention of legislature for establishing genuineness of transaction, was clear in terms of section 70(2) ibid where penalty provision has been incorporated for producing false documents – In present case, clear evidence had been adduced by Assessing Officer that in some of cases registration of selling dealers had been cancelled or even sale by concerned dealers had been disputed and/or denied – In all of these cases, purchasing dealers failed to produce supporting material mentioned and therefore burden of proof ibid was not discharged by them – Reversal by Tribunal of definite concurrent finding of fact recorded by lower authorities, was not justified and so was affirmation of Tribunal order by High Court – Reliance by assessee on KVAT Rules,2005 was misplaced as said Rules only prescribed invoice as one of document to avail ITC- Impugned judgments and orders passed by High Court and Tribunal were to be set aside and quashed and orders of Assessing Officer and first appellate authority denying ITC to purchasing dealer was to be restored [Section 70 of Karnataka Value Added Tax Act,2003]

We would also place reliance on the decision of The Kerala High Court’s decision in the case of M/s. Henna Medicals vs. State Tax Office, Thalassery & Ors. ascited in  [WP (C) 30660 of 2023 dated 19.09.2023] sets a significant precedent by emphasizing that differences between GSTR 2A and GSTR 3B should not be the sole basis for denying Input Tax Credit. The court underscores the importance of considering the totality of evidence provided by the taxpayer when evaluating the legitimacy of an ITC claim. This ruling provides much-needed relief for businesses facing ITC disputes based on minor discrepancies in their GST returns. It also reinforces the principle that evidence of a genuine ITC claim should weigh more heavily than discrepancies between these returns.

• In addressing query number 2, it is pertinent to note that the Input Tax Credit (ITC) amounting to Rs. 2,50,000 in both Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) was availed when transactions were conducted with the supplier, Shree Balaji Co. This transactional data was duly reflected in the Goods and Services Tax Return (GSTR) 2A during the relevant months. However, it has come to light that the registration of ABC. was subsequently cancelled suo-motu, retrospectively effective from the 11^th July 2017. This retrospective cancellation raises considerations regarding the eligibility and appropriateness of the initially claimed ITC in accordance with the revised status of the supplier.
• We intend to rely on the supporting documentation provided herewith. Enclosed in Annexure is the detailed Tax Invoice cum Challan, accompanied by the relevant E-way Bill details pertaining to the specified transactions. Additionally, we have attached the Bank statement reflecting the payments made to the supplier, further substantiating the legitimacy and completeness of the financial transactions in question. (For your reference, we have appended the GSTR-2A corresponding to transactions with ABC along with Tax invoices, E-Way Bills and Bank Transaction)

• In support of our above-mentioned submission, we rely on the following judicial pronouncements rendered by the Honorable Supreme Court and various High Courts in GST and as well as percent’s judgment during the Indirect Tax era which it has been categorically stated that merely because the registration of a supplier has been canceled retrospectively, denial of benefit of input tax credit to the recipient of the supply is not sustainable in law:

We would place our reliance on the Decision of Honorable Calcutta High Court in the Case of Sanchita Kundu Vs. The Assistant Commissioner of State Tax, Bureau of Investigation, South Bengal as cited in   [W.P.A. 7231 of 2022 With W.P.A. 7232 of 2022, dated 05.05.2022] Petitioner challenge denial of Input Tax Credit on the ground that the registration of the suppliers has been cancelled with retrospective effect covering the transaction period in question. The Petitioner was denied ITC benefit vide the impugned order on ground that GST registration of suppliers were already cancelled with retrospective effect covering the transaction period in question The contention of the petitioners that the transactions in question are genuine, valid and were made through banks. Calcutta High Court rules that benefit of ITC cannot be denied where all the transaction are proved to be genuine before the cancellation of registration of the suppliers. The Petitioner submits that the suppliers were indicated as registered taxable person at the Government portal showing their registrations as valid and existing at the time of transactions and moreover, considering the limitations, petitioner did whatever was possible in its own end to ascertain the validity of suppliers. Considering the facts, Court propounds that without any further verification it cannot be said that that there was any failure on the petitioner’s part in compliance of any obligation required under the statute before entering into the transactions and that there was no verification of the genuineness of the suppliers. Without any further verification it cannot be said that that there was any failure on the part of the petitioners in compliance of any obligation required under the statute before entering into the transactions. Therefore, setting aside the impugned order Court directs remand of the matter to consider afresh the entitlement of petitioner in the context of whether payments on purchase in question along with GST were actually paid or not, whether the transactions and purchases were made before or after the cancellation of registration of the suppliers and whether petitioner complied with the statutory obligation of verifying the supplier’s identity. Court directed the respondent officer to consider afresh on the issue of their entitlement of benefit of input tax credit in question by considering the documents which the petitioners intend to rely in support of their claim of genuineness of the transactions. If it is found upon verification and considering the relevant documents that all the purchases and transactions in question are genuine and supported by valid documents and transactions in question were made before the cancellation of registration of those suppliers and after taking into consideration as to whether facts of the petitioners are similar to the judgments upon which petitioners intend to rely and if it is found similar to the present case, in that event the petitioners shall be given the benefit of input tax credit in question.

We would rely on the decision of Honorable Calcutta High Court in the Case of LGW Industries Vs. Union of India as cited in [WPA No. 23512 of 2019, dated 13.12.2021]

Petitioner challenged the disallowance of input tax credit on the ground that the purchases made by petitioners are from non-existing suppliers and the bank accounts opened by those suppliers are on the basis of fake documents and that the petitioners have not verified the genuineness and identity of the suppliers before entering into transaction with those suppliers. Further grounds of denying the input tax credit benefit to the petitioners are that the registration of suppliers in question have been cancelled with retrospective effect covering the transactions period in question. Calcutta High Court remands the matter to GST Authorities to consider afresh the case of Petitioner on issue of their entitlement of benefit of ITC by considering the documents relied upon by Petitioner to support their claim of genuineness of the transactions. High Court directed the respondents to consider afresh the cases of the petitioners on the issue of their entitlement of benefit of input tax credit by considering the documents the petitioners want to rely in support of their claim of genuineness of the transactions and shall also consider as to whether payments on purchases in question along with GST were actually paid or not to the suppliers and also as to whether the transactions and purchases were made before or after the cancellation of registration of the suppliers and also consider as to compliance of statutory obligation by the petitioners in verification of identity of the suppliers. High Court considers Petitioner’s contention that they have paid the amount of purchases in question as well as tax on the same not in cash and all transactions were through banks and they are helpless if at some point of time after transactions were over. And if the Revenue finds on enquiries that the suppliers are fake and bogus and on this basis they cannot be penalized unless Revenue establishes with concrete materials that transactions in question were outcome of any collusion between Petitioner and suppliers in question. Revenue to envisages that subject to further verification, it cannot be said that there was any failure on part of Petitioner in compliance of any obligation required under Statute before entering transactions in question or for verification of genuineness of suppliers in question. Elucidates that if on consideration of relevant documents it is found that all purchases and transactions in question are genuine and supported by valid documents and transactions in question were made before cancellation of registration of those suppliers, benefit of ITC shall be given to the Petitioner.

We would place our Reliance on the decision of Honorable Madras High Court in the case of D.Y. Beathel Vs. The State Tax Officer (Date Cell), Investigation Wing as cited in  [W.P.(MD)Nos. 2127, 2117 & 2121, dated 24.02.2021]

Petitioner challenged recovery of input tax credit for non-payment of GST by seller. Petitioner challenged the automatic reversal of input tax credit from the buyer on non-payment of tax by the seller. Assessment Order was passed reversing ITC availed by the Petitioner for non-payment of tax by the Supplier. The Petitioner was engaged in the trading of Raw Rubber Sheets, had purchased goods from sellers and based on the returns filed by sellers, availed ITC. However, when Revenue discovered that sellers had not discharged their tax liability, Revenue passed the impugned orders, levying the entire liability on the Petitioner, rather than confronting the sellers. Assessment Order observes that ordinarily, the Petitioner must have received the goods and the tax charged in respect of supply must have been actually paid to the Govt., however, if the tax has allegedly not reached the Govt. kitty, then the liability will have to be eventually borne by one party, either the seller or the buyer. High Court noting that here, the Revenue does not appear to have taken any recovery action against the seller nor has taken a stand that the petitioner has not even received the goods and had availed ITC on the strength of generated invoices, remarks that “when it has come out that the seller has collected tax from the purchasing dealers, the omission on the part of the seller to remit the tax must have been viewed very seriously and strict action ought to have been initiated against him.” The impugned assessment order suffers from fundamental flaws of non-examination of seller in the enquiry and non-initiation of recovery action against seller in the first place therefore, the impugned assessment orders are quashed and the matters are remitted back to the file of the respondent.

We would reliance on the Decision of Honorable Supreme Court of India in the case of Commissioner of Trade And Taxes Delhi Vs. Arise India Limited as cited in  [Special Leave Appeal (C) No. 36750/2017, dated 10.01.2018]

Delhi VAT Act Section 9(2)(g) is similar to Section 16 (2) (c) where it was held that failure by Legislature to distinguish between bona fide and non-bonafide purchasing dealers resulted in Section 9(2)(g) applying equally to both the classes of purchasing dealers is hit by Article 14 of Constitution.

We would rely on the Decision of Honorable Madras High Court in the case of Sri Vinyaga Agencies Vs. Assisstant Commissioner [W.P. Nos. 2036 to 2038 of 2013, dated 19.01.2013] cited in

Law does not empower the tax authorities to reverse the ITC availed, on a plea that the selling dealer has not deposited the tax. It can revoke the input credit only if it relates to the incorrect, incomplete or improper claim of such credit.

We would place Reliance on the Decision of Honorable Punjab and Haryana High Court in the case of Gheru lal Balchand Vs. State of Haryana as cited in   [Civil Writ Petition 6573 of 2007 dated 23.09.2011]

The law need to distinguish between honest and dishonest dealers. Law cannot put such onerous responsibility on the assessee otherwise, it would be difficult to hold the law to be valid on the touchstone of Articles 14 and 19 of the Constitution of India. In the absence of any malafide intention, connivance or wrongful association of the assessee with the selling dealer or any dealer earlier thereto, no liability can be imposed on the principle of vicarious liability. Taxpayer cannot be forced to substantiate its truthfulness by running from pillar to post to collect the material for its authenticity.

We would rely on the decision of Honorable High court of Calcutta in the Case of Gargo Traders Vs. Joint Commissioner, Commercial Taxes (State Tax) & Ors. as cited in . In a significant decision, the Calcutta High Court clarified that Input Tax Credit (ITC) cannot be denied to a genuine buyer when the registration of the supplier is cancelled retrospectively. The case in point, Gargo Traders Vs. Joint Commissioner, Commercial Taxes , underscores the rights of the registered taxable person (RTP) who had claimed credit of input tax against supply from a supplier. The key concern for Gargo Traders was the refusal of the respondent authorities to grant the ITC benefit for purchases from the supplier, who was later revealed to be fraudulent. This led to the challenging of the order and raising the contention that the transactions ins question were legitimate, backed by due diligence on the part of the petitioner. The court acknowledged that at the time of the transaction, the supplier’s details were available as valid on the government portal. A significant turning point came with the referencing of previous judgements, particularly from the case of M/s Law Industries Limited & Ors. which clearly supported the petitioner’s stand. It was established that the cancellation of the supplier’s registration with retrospective effect shouldn’t be grounds for rejecting a genuine buyer’s refund application.

4. Acceptance and Request

• In the present instance, we are hereby submitting the aforementioned reply. As elucidated and disclosed in the preceding discussion, we assert that we are not liable for the payment of any taxes, as we have not engaged in any breach of the Goods and Services Tax (GST) law. Consequently, we respectfully request that the Order issued against us be expeditiously dropped.
• It is hereby humbly submitted that in our opinion we are not liable for the reversal of ITC based upon the above-mentioned submission and the relevant case laws.
• As ITC is the vested right of the Registered Person, once taken as per the applicable provisions of the Section 16 of the CGST Act, 2017. We have followed all the conditions for claiming of the ITC and ITC cannot be denied to bona-fide purchaser.
• In view of the above submission, documentary evidences produced and relying on the judicial pronouncements, you are requested to allow the legitimate input tax credit claimed by the taxpayer and drop the proceeding initiated in this regard.
• We respectfully urge that the show cause notice be quashed or modified, and additionally, we request an opportunity to present our case and be heard before any final order is issued against us. We appreciate your attention to this matter.

Thanks & Regards

For M/s XXX

Place: Delhi

Date: 06^th Feb 2024