No Tax Evasion if Goods Supplier Reported Sale in March but Buyer claimed GST ITC in April Returns: Kerala HC [Read Order]
The High Court noted that there was only a re-adjustment of tax and no wilful attempt of tax evasion.
The Kerala High Court recently granted relief to a goods buyer, clarifying that there can arise no pallegations of tax evasion if the supplier of goods reported the sale transactions during the month of March in the preceding financial year and the buyer claimed Input Tax Credit (ITC) while filing their returns for the month of April in the subsequent financial year.
The ruling was delivered against a writ petition filed by a registered GST dealer challenging the denial of input tax credit (ITC) and consequential demand raised under the Kerala State Goods and Services Tax Act, 2017 for the assessment year 2018–19.
The petitioner, Rakkimuthu Ramesh is a businessman in the plastic goods industry. The petitioner made purchases effected March 30 and March 31, 2018 from an out-of-State supplier.
Although the invoices were raised at the end of March 2018, the goods were received by the petitioner only in April 2018, falling in the subsequent financial year. Considering the date of receipt of goods, the petitioner included the transactions in their GST returns filed for April 2018 and claimed ITC accordingly.
However, the supplier had reported the same transactions in its March 2018 returns and discharged the tax liability for that period.
On account of this mismatch, the department initiated proceedings against the petitioner under Section 73(1) of the State GST Act, which led to an order denying ITC and raising a demand.
Before the High Court, the petitioner represented by R. Muraleedharan and N.Muraleedharan Nair contested the legality of the impugned order and contended that what is required is a re-adjustment of tax, by way of reconciliation.
The petitioner also pointed out that the show cause notice was uploaded under the “additional notices” tab on the GST portal, resulting in a lack of effective notice and denial of opportunity to produce original invoices.
Government Pleader Arun Ajay Shankar opposed the petition, contending that multiple opportunities had been granted to the petitioner to furnish supporting documents and that the proceedings were finalised due to non-compliance.
Justice Ziyad Rahman A.A., after considering the material on record noted that the events did not portray any willful attempt to evade tax by the petitioner. The Court observed that the confusion arose solely due to the transaction being spread across the fag end of the financial year 2017-18, while the goods were received by the petitioner during the commencement of the financial year 2018-19.
The High Court noted that in such events, only reconciliation and readjustment of tax was required and quashed the assessment order and demand, while directing the assessing authority to reconsider the matter after granting the petitioner an opportunity to produce the necessary records and invoices - all within a period of three months.
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