Denial of ITC on Allegation of Fictitious Supplier: Kerala High Court Directs Tax Authorities to Ensure Fair Hearing & Expedite Adjudication [Read Order]
ITC – Denial of ITC – Allegation – Denial of ITC on Allegation of Fictitious Supplier – Fictitious Supplier – taxscan
ITC – Denial of ITC – Allegation – Denial of ITC on Allegation of Fictitious Supplier – Fictitious Supplier – taxscan
The High Court of Kerala has issued a directive to the state tax authorities to ensure a fair hearing and expedite the adjudication process for G.K. Traders, a business entity facing the denial of Input Tax Credit (ITC) amounting to Rs.19,58,652/- on the grounds of alleged involvement with a fictitious supplier, M/s. M.M. Traders.
The case revolved around the allegations surrounding the authenticity of M/s. M.M. Traders, the alleged supplier of raw materials to G.K. Traders.
The petitioner, G.K. Traders, based in Feroke, Kozhikode, represented by its Managing Partner, Mr. Faisal had filed a writ petition before the Kerala High Court seeking directions to the tax authorities, specifically the Joint Commissioner and Assistant Commissioner/Deputy Commissioner of the State Goods and Services Tax (GST) Department, Kozhikode, to grant them the ITC that had been denied.
The petitioner was represented by Ammu Charles and K. Manoj Chandran while the respondent revenue was represented by Smt. Jasmine M. M.
The petitioner sought a direction for the tax authorities to grant them an ITC of Rs.19,58,652/-, which had been denied. They defended the legitimacy of their transactions with M/s. M.M. Traders, disputing the tax department’s claim that the supplier was fictitious.
The crux of the dispute is around the legitimacy of M/s. M.M. Traders, the party who supplied raw materials to the petitioner. The respondent revenue argued that the said supplier had no legal existence and that the claimed ITC was fictitious and fraudulent. To support their position, the revenue had issued various notices to the petitioner, including Form GSTR-3A notice and show cause notices.
In response to these notices, the petitioner submitted replies, defending the authenticity of the transactions with M/s. M.M. Traders. However, no decision on the matter has been taken by the revenue.
The respondent revenue assured the court that they would follow legal procedures to reach a decision on the show cause notices within ten days.
The bench issued a directive to the petitioner to present themselves at the office of the second respondent, i.e., the Assistant Commissioner/Deputy Commissioner on September 11, 2023, with all the necessary documents for the adjudication process.
The single bench of Justice Dinesh Kumar Singh emphasised that during the pendency of the decision-making process, no coercive measures should be taken against the petitioner. This ruling aims to provide the petitioner with a fair opportunity of being heard and to clarify the legitimacy of their transactions and claim for ITC.
The bench highlighted the need for tax authorities to thoroughly investigate allegations of tax fraud while also ensuring that legitimate businesses are not unfairly penalised.
To Read the full text of the Order CLICK HERE
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