Payment along with tax actually paid to supplier or not is to be verified before disallowing ITC: Calcutta HC

Case details: LGW Industries Ltd. v. Union of India - [2022] 134 taxmann.com 42 (Calcutta)

Judiciary and Counsel Details

• • MD. Nizamuddin, J. 

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 genuineness of suppliers was not verified before entering into transactions and refused to grant the benefit of input tax credit (ITC) on purchase from the suppliers and also asked the petitioner to pay penalty and interest under relevant provisions of GST Act. The petitioner filed writ petition against the same.

High Court Held

The Honorable High Court observed that when the names of the suppliers as a registered taxable person were already available with the Government record and in Government portal at the relevant period of transaction, then petitioner could not be faulted if they appeared to be fake later on. Therefore, it cannot be said that that there was any failure on the part of the petitioners in compliance of any obligation required under the statute before entering 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 and it was directed to verify whether payment along with tax actually paid to suppliers and transactions were made before cancellation of registration of suppliers.