ITC cannot be disallowed if genuineness of transaction is established

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The honourable Calcutta High Court in the case of  LGW Industries Limited & Ors. Vs Union of India & Ors. has ruled that taxpayers shouldn’t be denied the benefit of the input tax credit if one is able to establish the genuineness of the transaction through documentary evidence, and statutory obligations where registration of suppliers from whom procurements have been made is cancelled after the execution of transaction.





The Court was hearing a batch of four petitions (in the writ petitions in item nos. 1, 4, 6 and 8 – WPA No.23512 of 2019, WPA No.6768 of 2020, WPA No.7285 of 2020 with CAN No.1 of 2020 and WPA No.8289 of 2021) where show-cause notices (SCN) were issued to the taxpayers by the Department, refusing the benefits of input tax credit where registration of their suppliers was cancelled with retrospective effect covering the transactions period in question.

Petitioners also challenged the controversial Section 16 (c) 2 of the CGST regulations which denies taxpayers benefits of the input tax credit if their suppliers fail pay taxes for such transactions to the Government.

The single member bench of honourable Calcutta High Court  held that the purchases and transactions were supported by valid documents and that purchases and transactions made before the cancellation of GST registration were genuine and hence ITC is available.

The Court did not consider deciding on the issue of constitutional validity of Section 16(c) (2) of the Central Goods and Services Tax (CGST) Act 2017.

The Calcutta High Court’s order is a first of its kind wherein a High Court has decided on such matter.

Therefore, this ruling holds great significance for other High Courts where similar writ petitions are pending to be decided and a good precedence to the taxpayers to rely on ITC disputes were genuine transactions are established with documents.

SRIVATSAN.R.

NACIN, Chennai

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