2026-VIL-327-GSTAT-AGR
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  2. 2026-VIL-327-GSTAT-AGR

SGST Tribunal

GST - Eligibility of ITC under Section 16(2) of CGST Act, 2017 where the supplier is subsequently found to be non-existent - Respondent purchased GP sheet used in manufacturing of padlock and metal items from a supplier and claimed ITC thereon - Revenue informed that the supplier was a non-existent firm only issuing fictitious invoices without actual supply of goods - FAA allowed the first appeal and set aside the demand, against which the Revenue preferred the second appeal - Whether ITC can be denied under Section 16(2) to a purchasing taxpayer who possesses valid tax invoice, e-way bills, transport records and proof of payment through banking channels, merely because the supplier was subsequently found to be non-existent - HELD - Section 16(1) and 16(2) prescribe the conditions for claiming ITC, namely possession of tax invoice, actual receipt of goods, payment of tax charged to the public exchequer and filing of return under Section 39 - Respondent produced verifiable documents, being e-way bill, consignment note and payment details, and the raw material was utilised in manufacturing of padlock goods. The department neither questioned nor disputed the manufacture or sale of the finished goods, and manufacturing of such goods without raw material is impermissible, which validates actual physical receipt of goods. Payment for the inward supply was also proved through verifiable banking channels prior to receipt of SCN. At the time of the transaction the supplier was a registered entity carrying a valid GSTIN on the common portal, and a subsequent investigation declaring the supplier non-existent or retrospective cancellation of registration cannot automatically disentitle a bonafide buyer who acted upon the registration status displayed on the official portal - Though the burden of proving eligibility of ITC lies on the person claiming it under Section 155, Respondent successfully discharged it, and the burden to rebut shifted to the department, which failed to do so. The Revenue cannot make the purchasing dealer a guarantor for the supplier's statutory compliance or post transaction records - The question is answered against the Appellant, FAA rightly set aside the reversal of ITC - The appeal is dismissed - Justification of penalty under Section 74 of CGST Act against a purchasing dealer without proof of collusion or active participation in fraud - FAA set aside the demand and penalty, and the Revenue preferred the second appeal - Whether a penalty order under Section 74 is justified against a purchasing dealer without proving collusion or active participation in the fraud - HELD - Section 74 applies only where tax is not paid, short paid or ITC is wrongly availed by reason of fraud or wilful misstatement or suppression of facts to evade tax liability. To invoke Section 74, the onus is on the department to establish deliberate fraud, misinterpretation or collusion between buyer and supplier. In the SCN, the proper officer failed to produce any direct evidence, statement or material to show that the Respondent was aware of any bogus invoice ring operated by the supplier - Respondent, having produced tax invoice, e-way bill, consignment note, bank transaction statement and evidence of raw material consumption, is a bonafide taxpayer who entered into the transaction in good faith with a registered entity and cannot be penalised for the post transaction disappearance of the supplier. The penalty is not sustainable and set aside - The order of FAA is upheld and the appeal is dismissed.
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