Introduction:

The Calcutta High Court recently addressed the issue of denial of Input Tax Credit (ITC) by the Assistant Commissioner of State Tax in the case of Sanchita Kundu & Anr. vs. Assistant Commissioner of State Tax. The court acknowledged the petitioners' claim that their transactions were genuine and valid, backed by relevant supporting documents. The central question before the court was whether the petitioners could be penalized for the cancellation of their suppliers' registration with retrospective effect, which occurred after the transactions took place.

Background:

The petitioners in this case had filed writ petitions challenging the order of the respondent GST officer denying them the benefit of ITC on the goods purchased from suppliers. The denial of ITC was based on the grounds that the registration of the suppliers had been canceled retrospectively, covering the period of the transactions. Consequently, the respondents demanded the payment of penalties and interest under the provisions of the Goods and Services Tax (GST) Act.

The petitioners contended that they had exercised due diligence in verifying the genuineness and identity of the suppliers in question. They argued that the suppliers' names appeared as registered taxable persons on the government portal during the relevant period, indicating their valid and existing registration at the time of the transactions. The petitioners emphasized their limited ability to ascertain the authenticity of the suppliers and claimed that they had fulfilled their obligations by relying on the government records and portal.

Additionally, the petitioners highlighted that all purchases were made through banks and that they had paid the purchase amount and applicable taxes accordingly. They argued that they should not be penalized unless the department could provide concrete evidence establishing collusion between the petitioners and the suppliers. Furthermore, the petitioners noted that the purchasers' invoices were available on the GST portal in the form GSTR-2A, further supporting the genuineness of the transactions.

Court's Decision:

After considering the submissions of both parties and examining the available records, the Calcutta High Court disposed of the writ petitions. The court set aside the impugned orders and remanded the cases to the respondent officer for fresh consideration.

The court directed the respondent to reevaluate the petitioners' entitlement to the benefit of input tax credit by examining the documents presented by the petitioners. The respondent officer was instructed to determine whether the payments for the purchases, including GST, were actually made to the suppliers. Additionally, the respondent was tasked with assessing whether the transactions and purchases occurred before or after the cancellation of the suppliers' registrations.

Furthermore, the respondent officer was obligated to evaluate whether the petitioners had complied with their statutory obligations to verify the identity of the suppliers. The court emphasized that the respondent should consider the similarity of the petitioners' case to relevant judgments of the Supreme Court, various High Courts, and previous judgments of the Calcutta High Court, which the petitioners intended to rely on.

If the verification process and consideration of relevant documents revealed that all the purchases and transactions in question were genuine, supported by valid documents, and made before the cancellation of the suppliers' registrations, the petitioners would be entitled to the benefit of input tax credit.

Conclusion:

The Calcutta High Court's ruling in the case of Sanchita Kundu & Anr. vs. Assistant Commissioner of State Tax has provided hope to the petitioners who had their input tax credit denied due to the retrospective cancellation of their suppliers' registrations. The court emphasized the need for a thorough examination of the genuineness of transactions, payment records, compliance with statutory obligations, and alignment with relevant judicial precedents. This decision highlights the importance of considering the available evidence and providing an effective opportunity for the petitioners to present their case before reaching a final determination.