The
Allahabad High Court has dismissed a petition filed by a firm against penalty,
interest imposed on it, and reversal of input tax credit (ITC) on inward
supplies of goods by non-existent firms.
The
court upheld the order passed by the Additional Commissioner in this regard.
The court observed, "fraud vitiates even the
most solemn proceedings and the mere fact that the ITC benefit had earlier been
granted to the assessee merely because the firms were then registered, would
not create any estoppel against the authority taking appropriate action for
claiming refund of the benefit wrongly availed".
The assessee is engaged in the manufacturing and
sale of aluminium casting and machinery parts and, during a survey of the place
of business, it was found that it claimed to have received inward supplies from
three firms and claimed ITC on such inward supplies.
After
availing of ITC by the assessee, an enquiry was conducted by the Special
Investigation Branch (SIB) and it came to light that the firms from which the
assessee claimed to have received inward supplies were non-existent and bogus.
However,
the assessee submitted that it had actually received inward supplies, which is
established from the records produced before the adjudicating authority, and
the supplier firms had valid GSTIN registration when it had received the
supplies. The assessee claimed that in case the GSTIN registration of the firm
is cancelled subsequently, his firm cannot be penalised for the same.
The
court said that merely because the firms were registered on the date of the
transaction, it cannot be said that the department is bound to give ITC benefit
to the assessee, even though it has been revealed later that the firms were
non-existent, and they could not have made actual supplies.
Sandeep
Sehgal, partner at AKM Global, a tax and consulting firm, said the court's
ruling underscored the critical requirement for businesses to engage in genuine
transactions when claiming ITC. This judgement serves as a stern warning
against fraudulent practices and reinforces the necessity for strict adherence
to GST laws.