Whether ITC is eligible in the absence of proof of the genuineness of transactions

No, the Honorable Supreme Court in the case of The Additional Commissioner of Commercial Taxes v. M/s Shankara Infrastructure Materials Ltd. [arising out of SLP (Civil) No. 5504 of 2022 dated October 14, 2024] granted leave and allowed the appeal and disposed of the case. The respondent M/s. Shankara Infrastructure Materials Ltd. was duly served notice, however, no appearance was made before the officer. Further, on July 19, 2024, the case was last listed. The Additional Commissioner of Commercial Taxes (petitioner) contended that the case was covered by the judgment of State of Karnataka v. Ecom Gill Coffee Trading Private Limited [Civil Appeal No. 230 of 2023] and alleged that the case is of bogus claim without any actual transactions. Hence, the Assessee cannot claim the Input Tax Credit.

Transactions with a non-existing or bogus entities do not satisfy the criterion for claiming ITC. The Honorable Court relied on the case of Ecom Gill Coffee Trading Private Limited (supra) and noted that the burden of proving that the ITC is correct, lies on the purchasing dealer and merely claiming to be a bona fide purchaser is not enough to discharge this burden. The dealer must provide additional evidence and proof of the actual physical movement of goods.

Author’s Comments
Where self-assessment is challenged, the burden rests on the Revenue making the allegation and not on
the Registered Person-suffering the allegation. The Burden of proof is not discharged by making the allegation. The Burden of proof is discharged only when a mountain of evidence commensurate with the nature of the allegation made is produced and appended to notice.

Allegations of severe wrong-doing require proportionately substantial evidence. Evidence is not extracted from books of accounts or statements taken on-oath. Evidence is that proves something. Section 155 of the CGST Act places the burden to prove regarding “eligibility to credit” only on the taxpayer. Once, it is shown that all the conditions of section 16 are fulfilled, the taxpayer’s burden is discharged and the onus shifts on the department to prove their case. In the instant case, the petitioner could have disputed the allegation stating that being a trader; if the outward supplies are accepted to be genuine then inward supplies have to be genuine. And if inward supplies are in genuine and outward supplies are accepted to be genuine, then the allegation is deeply rooted in incomplete investigation, surmise and conjecture only. The Revenue cannot approbate and reprobate on the same issue. The taxpayer must have allowed the revenue to prove their case and in the absence of evidence in support of allegations, allegations are self-defeating.