Genuine business transactions with the suppliers if buyers have not colluded to defraud the revenue: Welcome judgment by Calcutta High Court
Here is an interesting case by Calcutta High Court which may be relevant for all the genuine GST buyers.
GST authorities are issuing notices for reversal of input tax credit on the basis of allegation that the suppliers from whom the buyers are claiming to have purchased the goods in question are all fake and non-existing and the bank accounts opened by those suppliers are on the basis of fake documents and assessee’s claim of benefit of input tax credit are not supported by the relevant documents. It is further alleged that the buyer has not verified the genuineness and identity of the suppliers before entering into any transaction with those suppliers. Further grounds of denying the input tax credit benefit is that the registration of suppliers has been canceled with retrospective effect.
Recently, the Hon’ble Calcutta High Court in the case of M/s LGW Industries Limited & Ors. v. Union of India & Ors., (WPA No.23512 of 2019) vide its judgment dated 13th December’ 2021 has remanded the matter back to the GST authorities to consider afresh the cases of the petitioners on the issue of their entitlement of benefit of input tax credit by considering the documents which the petitioners want to rely in support of their claim of genuineness of the transactions by considering whether payments for purchases with GST has been actually paid or not to the suppliers and by also considering whether the transactions and purchases were made before or after the cancellation of registration of the suppliers and the compliance of statutory obligation by the petitioners in verification of identity of the suppliers.
It was directed by the Hon’ble High Court that if it is found upon considering the relevant documents that all the purchases and transactions in question are genuine and supported by valid documents and transactions were made before the cancellation of registration of those suppliers then the benefit of input tax credit shall be given.
This verdict of the Hon’ble Calcutta High Court will provide welcome relief to those business entities which have entered into genuine business transactions with their suppliers and have not colluded with them to defraud the revenue.
The copy of the order is as under:
