No ITC on Closing Stock Without Resale Under VAT | HC

Case Details: Commissioner Commercial Tax vs. S/S Ravi Prakash Rahul Prakash - [2025] 174 taxmann.com 771 (Allahabad)

Judiciary and Counsel Details

• Piyush Agrawal, J.
• Bipin Kumar Pandey for the Appellant.
• Vishnu Kesarwani for the Respondent.

Facts of the Case

The dealer was registered under the UP VAT Act and engaged in trading food grains including rice. As of 30-06-2017, just before the introduction of GST on 01-07-2017, the dealer held closing stock on which input tax had been paid under the VAT regime. The dealer initially filed Form GST TRAN-1 to claim input tax credit (ITC) on this closing stock but subsequently filed Form GST TRAN-2 reversing the ITC claim upon realising that such credit was not admissible.

The Commercial Tax Tribunal (CTT), Allahabad had passed an order allowing the dealer to claim ITC benefit on the closing stock. The revisionist (department) challenged this CTT order before the Allahabad High Court. The revisionist argued that under Section 13 of the UP VAT Act, ITC can only be claimed if purchased goods are resold as taxable sales. Since the dealer had not sold the closing stock on the date GST was introduced and the goods were not exempt under GST, the input tax paid under VAT did not mature into ITC under GST.

High Court Held

The Hon’ble High Court of Allahabad allowed the revision, setting aside the CTT order in favour of the revisionist. The Court held that input tax credit under the UP VAT Act is available only when purchased goods are resold as taxable sales under Section 13, and mere holding of closing stock on the GST introduction date does not qualify for ITC. Since the dealer had not sold the goods as of 01-07-2017 and the closing stock was not exempt under the GST Act, the input tax credit on such stock was inadmissible. Consequently, the High Court of Allahabad upheld the department’s position on disallowing ITC on closing stock.

List of Cases Reviewed

• Commissioner, Commercial Tax v. S/S Janki Industries Nai [Sales/Trade Tax Revision No. 10 of 2025, dated 9-5-2025] (para 17), followed

List of Cases Referred to

• Commissioner, Commercial Tax v. S/S Janki Industries Nai [Sales/Trade Tax Revision No. 10 of 2025, dated 9-5-2025] (para 3)
• Farooq Agencies v. CCT [2013] 37 taxmann.com 473 (Allahabad) (para 4)
• CIT v. R. Hanumathappa and son (1971) 3 SCC 592 (para 5)
• State of Jharkhand v. Govind Singh (2005) 10 SCC 437 (para 5)
• Sangeeta Singh v. Union of India (2005) 7 SCC 484 (para 5).