The Madras High Court has held that Input Tax Credit (ITC) cannot be denied citing mere non-availability of lorry receipts or e-way bills when supplier is registered and tax is paid.

The bench of Justice Senthilkumar Ramamoorthy has set aside a GST assessment order and remanded the matter for fresh consideration after observing that the authorities had failed to properly examine whether the supplies were genuine.

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The case involved a challenge to an order dated April 28, 2023, by which the GST department confirmed a tax demand alleging wrongful availment of ITC for the assessment year 2018-19. The dispute related to purchases made from a supplier, Eco-friendly Coco Products, against which the department questioned the legitimacy of the transactions.

Before the Court, the taxpayer contended that the supplier was a registered GST dealer at the time the goods were supplied and that the supplier’s registration was cancelled only subsequently. The taxpayer further pointed out that the purchases were supported by tax invoices containing vehicle numbers used for transportation of the goods. It was also argued that the supplier had duly filed GST returns reflecting the supplies and had paid the corresponding taxes to the Government.

The State, on the other hand, relied on Sections 16 and 155 of the GST law and argued that the burden of proving eligibility to ITC rests upon the taxpayer. According to the department, the taxpayer had failed to establish actual movement of goods and therefore could not lawfully avail the credit.

Justice Senthilkumar Ramamoorthy examined the assessment order and noted that it referred to eight invoices issued by the supplier between January 2018 and August 2018. The Court observed that the supplier was admittedly registered during the relevant period and that each invoice contained details of the vehicle through which the goods were transported. The taxpayer had also consistently maintained that the supplier arranged transportation of the goods.

The Court found that these facts required a deeper inquiry into the genuineness of the transactions. It observed that the supplier had filed the requisite GST returns and paid taxes in relation to the supplies. In such circumstances, the authorities were required to undertake a more detailed examination before concluding that the transactions were bogus. However, the tax proposal had been confirmed solely on the ground that lorry receipts and weighment slips were not produced.

Holding that the assessment order suffered from inadequate consideration of relevant facts, the High Court concluded that the order could not be sustained. The Court therefore set aside the impugned order and remanded the matter to the Assistant Commissioner for fresh adjudication. The taxpayer was granted 15 days to submit additional documents relating to the disputed supplies, and the department was directed to pass a fresh order within three months after providing a reasonable opportunity of hearing.

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