GSTAT Order
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SGST Tribunal

GST - Applicability of Section 74 of CGST Act to ITC availed based on invoices from Non-Existent Suppliers, Discharge of burden under Section 155 of CGST Act – Respondent-assessee availed and utilized ineligible input tax credit on the basis of invoices issued by non-existent suppliers during the relevant period of supply claiming that during the transactions the registration status of all suppliers was active on the GST portal. However, scrutiny by the Revenue disclosed that each of the suppliers was a non-existent entity and none of them had ever conducted any business at all - Whether the Section 74 of the CGST Act is applicable when taxpayer who availed ITC on invoices issued by non-existent suppliers without proof of actual physical movement of goods - HELD - The burden of proving the rightful claim of input tax credit lies on the person claiming the credit as per Section 155 of the CGST Act. Mere production of tax invoices and banking details showing payment is not sufficient to discharge this burden. The purchasing taxpayer has to prove and establish the actual physical movement of goods and the genuineness of transactions by furnishing details of the vehicle which delivered goods, payment of freight charges, acknowledgement of taking delivery of goods and other corroborating evidence - In the present case there is no proof of actual physical movements of goods from the alleged suppliers to the Respondent who admittedly availed and utilised input tax credit based on invoices issued by these suppliers - The Respondent was fully aware that the suppliers on whose invoices the ITC was availed and utilised were non-existent. The Respondent was also completely aware that the goods for the supply on which the ITC was claimed were not actually delivered - There was a wilful misstatement in self assessment made by the Respondent in the monthly return. Such conduct clearly demonstrates that the Respondent deliberately defrauded the Revenue for taking ineligible input tax credit - The demand of input tax credit availed on the basis of invoices from non-existent suppliers is payable under Section 74 of the CGST Act along with applicable interest and penalty. The findings of the appellate authority in exonerating the Respondent from the liabilities under Section 74 are set aside and the demand confirmed by the adjudicating authority is restored – The Revenue appeal is allowed - Validity of Consolidated Show Cause Notice Covering Multiple Financial Years under Section 74, Meaning of period as against financial year - The Respondent contended that a single consolidated show cause notice could not have been issued covering multiple financial years from 2017-18 to 2023-24 - Whether the statutory scheme under the CGST Act permits issuance of a consolidated SCN under Section 74 covering multiple financial years - HELD - The statutory scheme does not prohibit issuance of a consolidated notice for multiple financial years. Sections 74(3) and 74(4) of the CGST Act employ the expressions for any period and for such periods, whereas Section 74(10) uses the term financial year for the purpose of prescribing limitation for passing the order. The Legislature is conscious that insofar as wrongfully availed ITC is concerned, the notice can relate to a period and need not be for a specific financial year. The nature of ITC fraudulent utilization and availment cannot be established on most occasions without connecting transactions over different financial years. The purchase could be shown in one financial year and the supply may be shown in the next financial year. It is only when either are found to be fabricated or the firms are found to be fake that the maze of transactions can be analysed and established as being fraudulent or bogus. A solitary availment or utilization of input tax credit in one financial year may actually not be capable by itself of establishing the pattern of fraudulent availment or utilization - The issuance of a consolidated show cause notice for multiple financial years under Section 74 of the CGST Act is valid and does not constitute a jurisdictional defect - Applicability of Section 74 of CGST Act to Demands under Reverse Charge Mechanism - Distinction between inadvertence and wilful misstatement – Respondent claimed that expenses incurred towards conveyance charges, hiring of labourers, freight and travelling expenses and legal charges were not taxable under the RCM - The First Appellate Authority concluded that there was no deliberate action to suppress material information with a view to evade tax and that the expenses were properly reflected in the annual financial statements of the Petitioner - Whether Section 74 of the CGST Act can be invoked for demands relating to RCM when there is no proof of deliberate suppression of facts with intent to evade tax - HELD - The term suppression of facts as contemplated under Section 74 of CGST Act must be construed strictly. Suppression of facts in taxation means that the correct information was not disclosed deliberately to escape payment of tax. Where facts are known to both the parties, the omission by one to do what one might have done and not that one must have done does not render it suppression - In the present case in so far as the demand under Reverse Charge Mechanism is concerned, no deliberate action to suppress material information with a view to evade tax has been proved against the Respondent. The expenses incurred were properly reflected in the annual financial statements of the Respondent indicating there was no attempt to evade tax liabilities. Therefore Section 74 of the CGST Act cannot be invoked for enforcement of demands under RCM - The demand under RCM is payable under Section 73 of the CGST Act along with applicable interest and penalty and not under Section 74 of the CGST Act - Power of First Appellate Authority to modify the demand determined by the Proper Officer - The Revenue contended that the First Appellate Authority exceeded its jurisdiction by modifying the amount of tax and confirming the liability itself instead of issuing directions to the proper officer for fresh computation as required under Section 75(2) and (3) of the CGST Act - Whether the First Appellate Authority has the power to modify the amount of tax determined by the proper officer without referring the matter back to the proper officer for fresh computation - HELD - Section 75 of the CGST Act which provides for general provisions relating to determination of tax empowers the Appellate Authority under sub-section (8) to modify the amount of tax determined by the proper officer - The First Appellate Authority has the inherent power to modify the amount of tax determined by the proper officer after meticulous examination and comparison of records and does not need to refer the matter back to the proper officer for fresh computation when the computation by the proper officer itself is found to be incorrect and the appellate authority has already re-examined and verified the records and computed the correct liability - The First Appellate Authority does not exceed its jurisdiction by modifying the tax amount itself. The challenge by the Revenue to the jurisdiction of the First Appellate Authority in respect of modification of tax amount by itself is devoid of merit - The appeal filed by the Revenue is partly allowed.
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