2026-VIL-197-GSTAT-BLR
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  2. 2026-VIL-197-GSTAT-BLR

SGST Tribunal

GST - Input tax credit under Section 16(2)(c) of the CGST Act, 2017 - Demand under Section 73(9) on the sole ground that the suppliers had not paid the tax to the Government - Appellant contended that a bona fide purchaser cannot be denied credit for the default of the supplier, relying on decisions of the Calcutta High Court and the jurisdictional High Court reading down Section 16(2)(c) - Whether, after the decision of the Supreme Court dismissing the special leave petitions against the judgment upholding Section 16(2)(c), the provision can be read down in favour of a bona fide purchaser - HELD - Section 16(1) confers the entitlement to credit and Section 16(2) conditions it, with cumulative conditions opening with a non obstante clause. The Supreme Court, with reasons, held that the Delhi VAT Act and the CGST Act rest on different statutory schemes, that Sections 41, 73 and 74 provide a framework under which a purchaser may re-avail credit once the supplier discharges the tax, and that there is no ground to hold Section 16(2)(c) unconstitutional or to read it down - Where the Supreme Court gives reasons, the law stated in those reasons is a declaration under Article 141 and binds all courts and Tribunals - The jurisdictional High Court rendered its judgment before the Supreme Court pronounced on the question, and the Tribunal is bound to apply Section 16(2)(c) as enacted and upheld - An honest purchaser is not without remedy, as Circular No. 183/15/2022-GST enables the purchaser to establish the supplier's payment by a certificate for 2017-18 and 2018-19, and the proviso to Section 41(2) permits re-availing the credit once the supplier pays the tax - Section 16(2)(c) applies as enacted and cannot be read down, and payment of tax to the supplier, however well proved, does not by itself satisfy the clause. The Appellant must prove that the suppliers paid the tax to the Government - The appeal is disposed of - Burden of proving payment of tax by the suppliers for the year 2018-19 and Circular No. 183/15/2022-GST - Notice for the mismatch - First Appellate Authority held that a certificate from the supplier was required as the difference per supplier was below the prescribed limit and none was produced - Appellant contended that the demand rested on a mere comparison of GSTR-3B with GSTR-2A and that the Adjudicating Authority did not apply the Circular - Whether the Appellant has proved, as Section 155 requires, that the suppliers paid the tax - HELD - A shortfall in GSTR-2A does not by itself establish that the supplier failed to pay the tax, as GSTR-2A is a facilitator for self-assessment and not an instrument of assessment, and neither Section 16(2)(aa) nor Rule 36(4) was in force during that year - The Circular does not dispense with Section 16(2)(c) and does not shift to the Department the burden placed by Section 155 on the claimant, but prescribes the manner of discharging that burden. The Appellant produced no certificate from either supplier or an accountant, no return of the supplier and no letter to the supplier, and nothing explains why a supplier paid in full through the bank could not be approached - Mere production of invoices or payment through the bank is not enough, and Section 155 states the same principle in express terms – However, the contention that the adjudication was mechanical has substance since the Circular binds the Department and a demand on a bare comparison of the returns without following it is liable to be set aside - The First Appellate Authority applied the Circular and informed the Appellant what was required, the Appellant still produced nothing before the Tribunal. A party complaining of a procedural lapse must show real prejudice, which is not shown - The condition in Section 16(2)(c) is not satisfied, and this finding by itself sustains the demand - Plea of genuine purchase and evidence of movement and receipt of goods - Whether the Appellant has established its plea that the goods actually moved from the supplier and were received by it - HELD - The plea must be established by the party raising it. An e-way bill was mandatory for the inter-State movement above the prescribed value, and it is the contemporaneous record connecting the invoice with a vehicle carrying the goods to a stated destination. Physical movement is to be proved by details of the vehicle, payment of freight charges and acknowledgement of taking delivery. The e-way bill was within the reach of the Appellant, and its unexplained non-production weighs against the claim that the goods moved as the invoice states. The subsequent movement of the goods to the place of export is equally unrecorded. The export documents, in the absence of any record linking them with the supplier's invoice and without explanation of the difference in description, classification and rate of tax, do not establish the link - Even if receipt were proved, it would go only to Section 16(2)(b) and cannot establish that the supplier paid the tax. The finding does not confirm the demand on a new ground barred by Section 75(7), as the demand rests on Section 16(2)(c) and the finding only answers the plea of the Appellant - Absence of an e-way bill does not defeat credit in every case, but where a recipient relies on the genuineness of an inter-State purchase above the threshold value, the e-way bill is the primary evidence of movement, and if it is not produced and its absence is not explained, movement must be proved by other reliable contemporaneous evidence - The plea of genuine purchase fails - Confirmation of tax, interest under Section 50(3) read with Rule 88B(3) and penalty under Sections 73(9) and 122(2)(a) - Adjudicating Authority directed recovery of interest at applicable rates without any working or finding on utilisation, and imposed penalty at the statutory minimum under each enactment - Whether the tax, interest and penalty are payable - HELD - Tax is sustained for the reasons recorded on the failure to prove payment by the suppliers, including the portion relating to the supplier for which no material was produced. Interest is compensatory and follows the tax, and Section 50(3) levies interest on credit wrongly availed and utilised, with Rule 88B(3) prescribing that interest runs from the date of utilisation to the date of reversal or payment and that credit is treated as utilised when the balance in the electronic credit ledger falls below the amount wrongly availed. The liability to interest is upheld, but the grievance about computation is well founded as the order records no working and no finding on utilisation - Penalty under Section 73(9) is mandatory at ten per cent of the tax or the prescribed minimum, whichever is higher, and does not depend on fraud or intent to evade, which are the province of Section 74, so the absence of such a finding does not assist the Appellant - The demand of tax and the penalty are upheld, and interest is payable on the credit wrongly availed and utilised - The appeal is dismissed.
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