ITC Not allowed on Supply Received from Non-existent Firm


ITC Not allowed on Supply Received from Non-existent Firm


The Allahabad High Court has held that the authorities are not estopped from taking action against wrongful claim of input tax credit merely because the firms with which transactions were alleged to have been done were registered at the time of the alleged transactions.

The Court observed that petitioner was granted ITC based on fulfillment of requirements under Section 16. The Court held that after the inquiry the firms were later found to be non-existent, bogus and merely existing on paper.

The Court held that since the registration was obtained, by the firms in questions, in the name of non-existent firms, supply could not have been made to such firms.

“Merely because the firm was registered on the date of transaction, it cannot be said that the department is bound to give I.T.C. benefit to the petitioner, even though it has been revealed later on the firm was non-existent and it could not have made any actual supplies.”

The Court held that inward supplies received from non-existent firms to claim benefit of input tax credit amounts to fraud against the department and public exchequer.

The Court held that there was sufficient material in the SIB report to support the order passed by the Adjudicating Authority imposing penalty on the petitioner. Accordingly, the writ petition was dismissed.

M/S Rajshi Processors Raebareli Thru. Its Partner Ashok Kumar Lakhotia v. State Of U.P. Thru. Prin. Secy. Deptt. Of State Tax,Lko. And 2 Others


The copy of the order is as under: