Credit Rightly Blocked Since Supplier Didn’t Have Any Business & Engaged in Passing on Ineligible Input Tax Credit | Madras HC

Case Details: Sri Rameswar Metal House v. Assistant Commissioner (ST) - [2023] 154 taxmann.com 5 (Madras)

Judiciary and Counsel Details

• • C. Saravanan, J.
  • K. Senguttuvan for the Petitioner.
  • E. Ranganayaki for the Respondent.

Facts of the Case

The petitioner was a wholesale dealer in stainless steel items. It purchased steel products from a supplier who on ineligible Input Tax Credit (ITC) to numerous tax payers including the petitioner. The department blocked ITC of petitioner on the ground that it availed ITC on strength of invoices of a trader/supplier, who was not having any business and was reportedly engaged in passing on ineligible ITC.

It filed writ petition and contended that blocking of ITC was incorrect as the petitioner was denied the utilization of ITC availed on the purchases made from various buyers for discharging tax liability.

High Court Held

The Honorable High Court noted that the department received report that the said trader/supplier was non-existing entity and had not conducted any business activity at address for which, registration was obtained and found to have passed on ineligible ITC to numerous tax payers. Prima face, there was no case made out for interfering with the steps taken by the department since the petitioner was already informed that the supplier didn’t have any business and passed ineligible ITC.

Therefore, the Court directed department to initiate appropriate proceedings under section 73 or 74 and the liberty is given to the petitioner to challenge the impugned order before the Appellate Authority.

List of Cases Reviewed

• • Rajnandini Metal Ltd. v. Union of India [2022] 140 taxmann.com 325/19 GST 15/2022 (64) G.S.T.L. 301 (Punj. & Har.) (para 6) distinguished.

List of Cases Referred to

• • Rajnandini Metal Ltd. v. Union of India [2022] 140 taxmann.com 325/19 GST 15/2022 (64) G.S.T.L. 301 (Punj. & Har.) (para 6)