In the recent judgment pronounced by the Supreme Court in the case of Assistant Commissioner of State Tax, Ballygunje and Others Vs Suncraft Energy Pvt. Ltd. [2023-VIL-99-SC], Apex Court dismissed the SLP filed by the department against the Calcutta High Court judgment. In this case, Calcutta HC passed an Order in favor of the assessed against which the department had gone into appeal before SC. The said decision of HC is discussed below.
Summary of HC judgment:
Suncraft Energy Private Limited and another Vs The Assistant Commissioner, State Tax, Ballygunge Charge & others [2023-VIL-487-CAL]
In this case, the department disputed the ITC claimed by the petitioner on the ground that neither the supplier’s invoices were reflected in GSTR-2A of the Appellant nor the supplier had remitted the tax collected. Petitioner in its support has submitted a copy of tax invoices along with a bank statement substantiating the payment to said vendor. Also, the petitioner submitted that the department has not conducted any inquiry on the supplier particularly when the clarification (Press release dated 18 October 2018) was issued that furnishing of outward supplies in Form GSTR-1 by the supplier and the facility to view the same in Form GSTR 2A by the recipient is in nature of taxpayer facilitation and does not impact the ability of taxpayers to avail ITC on the self-assessment basis in consonance with provisions of Section 16 of CGST Act.
Honorable High Court accepting the contention of the petitioner held that the department without resorting to any action against the supplier has completely ignored the tax invoices and bank statements submitted by the petitioner and therefore this action by the department is arbitrary. Therefore, before directing the petitioner to reverse the ITC and remit the same to the Government, the department ought to have taken action against the supplier. Hence, HC accepted the writ and held that the demand raised on the petitioner in this case is non-sustainable and to be set aside.
Being aggrieved by this Order, the department had filed the SLP before the Apex Court.
Position after the above judgment:
In light of the above judgment, the immediate question that comes to mind is whether the issue pertaining to the reversal of ITC in case of default in payment of tax by vendor is settled.
To answer the above, we need to consider the following positions:
- Amendment in Section 16(2) of CGST i.e. insertion of clause (aa). In light of the same, matching of ITC with GSTR-2B is now compulsory. Therefore, the argument in the above case that GSTR-2A is merely a facilitation may not hold valid for the period post-1 January 2022. Also, for the period post 9 October 2019 onwards, wherein in light of Rule 36(4) matching of ITC with GSTR-2A became a mandatory practice, the said press release dated 18 October 2018 cannot be relied upon.
- Another critical point to ponder upon is that the Apex Court in this case has rejected the SLP filed by the department without getting into the merits. Apex Court held that demand is on the lower side, this court is not inclined to interfere in the matter. Hence, it is plausible that a matter on similar ground is independently evaluated by Apex Court and a divergent view is taken.
- HC in many cases is placing reliance upon the judgment of Apex Court in the case of Ecom Gill Trading Pvt. Ltd. In the said case, Apex Court has highlighted additional details/documents that are required to be produced for substantiating the claim for ITC. The said principle is being now followed in GST with reference to Section 155 of the CGST Act for denying the ITC claim.
Hence, at this stage, it is difficult to conclude that the issue pertaining to the reversal of ITC in the case where the supplier has not remitted the tax to the Government is settled. Therefore, it will be crucial to track the positions which HC may take now in light of the above-referred judgments.
Disclaimer: This article provides general information existing at the time of preparation and we take no responsibility to update it with the subsequent changes in the law. The article is intended as a news update and Affluence Advisory neither assumes nor accepts any responsibility for any loss arising to any person acting or refraining from acting as a result of any material contained in this article. It is recommended that professional advice be taken based on specific facts and circumstances. This article does not substitute the need to refer to the original pronouncement
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