The Input Tax Credit Claim was rejected by the Tribunal and the Karnataka High Court (HC) at the Supreme Court of India, which was presided over by Judge M.R. Shah.
The respondent M/s Tallam Apparels (‘purchasing dealer’) purchased readymade garments from other dealers for the purposes of further sale. The purchasing dealer claimed the ITC on such sale to the extent of Rs. 4,18,818.
The Assessing Officer (AO) disallowed the ITC claim for the Assessment Year 2012-2013 on the ground that the dealers from whom M/s Tallam Apparels have purchased the readymade garments have either got their registration cancelled or have filed ‘NIL’ returns.
On the grounds that the purchasing dealer should just not endure the consequences of the seller’s default, the Karnataka Appellate Tribunal overturned the decisions made by the AO and the first Appellate Authority. The contested judgement and order have dismissed the High Court’s revision petition.
That is to clarify, both the Tribunal and the HC approved the ITC in favour of the purchasing dealers based solely/primarily on the evidence of the account payee check used to pay the sale price to the seller and the existence of copies of the invoices.
It was asserted that, in order to comply with Section 70 of the Karnataka Value Added Tax Act, 2003, (KVAT), it is significantly more difficult to demonstrate real transportation of goods than money transactions.
The bench observed that mere production of invoices or even payment to the seller by cheque cannot be said to be sufficient and may not be said to discharging the burden to claim Input Tax Credit, to be discharged under Section 70 of the KVAT.
The order issued by the High Court and the ITAT approving the ITC was declared unsustainable by the Supreme Court (SC), and as such, it is thus quashed and set aside.
The Assessing Officer’s decisions to withhold the ITC to the concerned purchasing dealers, which the First Appellate Authority affirmed, are also thus reversed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.
