Blog

Payment to the supplier along with the tax should be verified before disallowing ITC: Calcutta HC

LGW Industries Ltd. Vs Union of India [2022]

The Hon’ble Calcutta High Court has recently held that benefit of ITC is to be granted if the purchases are genuine, supported by documents, payment along with tax actually made to supplier and transactions were made before cancellation of registration of supplier. The High Court of Calcutta gives this ruling in the case of LGW Industries Ltd. Vs. Union of India.

Facts of the Case

The petitioner received notices from the department, and it was alleged that its suppliers were fake and non-existent. The department contended that the genuineness of suppliers was not verified before entering into transaction and refused to grant the benefit of input tax credit (ITC) on purchase from the suppliers and also asked the petitioner to pay the penalty and interest under relevant provisions of the GST Act. The petitioner filed a writ petition against the same.

Observations of the High Court

The Hon’ble High Court observed that when the names of the suppliers as a registered taxable person were already available with the Government record and in the Government portal at the relevant period of transaction, then the petitioner could not be faulted if they appeared to be fake subsequently. Therefore, it cannot be said that there was any failure before entering into the transactions in question or for verification of the genuineness of the suppliers in question. Thus, it was held that benefit of ITC to be granted if the purchases were genuine and supported by documents. It was directed to verify whether payment along with tax actually made to suppliers and transactions were made before the cancellations of registration of suppliers.

Credit: Taxmann