By Vinay Jain and Jay Chheda, Advocates
Whether production of tax invoice and payment through cheque is sufficient documentary evidence to prove genuineness of purchase transaction and claim ITC under section 70 of the KVAT Act, 2003?
Facts & Pleadings:
The question of law and fact involved was regarding the interpretation of Section 70 of the Karnataka Value Added Tax, 2003. The assessee was a purchasing dealer that purchased green coffee from other dealers for re-sale. For the purpose of the same, Input Tax Credit was claimed by the assessee. The department, based on material on record doubted the genuineness of the transactions and purchases made from the dealers and denied ITC claim to the buyer of goods. Both Appellate Tribunal and High Court, had allowed ITC claim to the buyer of goods on the ground that the company had purchased from dealers under genuine tax invoices and made payment through cheques.
The Revenue filed an appeal before Supreme Court and contended that the burden of proof required under Section 70 of the KVAT Act, 2003 is higher than merely showing financial transfers and tax invoice. The buyer ought to also prove actual movement of goods.
The company on the other hand submitted that burden of proof under section 70 is discharged and the genuineness of the transaction is proved by producing genuine tax invoices and payments through cheque. Once the burden cast under Section 70 is discharged, the Appellant is entitled to ITC.
Judgement Passed by the Supreme Court of India
The Supreme Court held that mere production of the invoices or the payment made by cheques is not enough and cannot be said to be discharging the burden of proof cast under section 70 of the KVAT Act, 2003. The dealer claiming ITC has to prove beyond doubt the actual transaction which can be proved by furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc.
Therefore, for claiming ITC, genuineness of the transaction and actual physical movement of the goods are the sine qua non and the aforesaid can be proved only by furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. The purchasing dealers have to prove the actual physical movement of the goods, alleged to have been purchased from the respective dealers. It was held that if the purchasing dealer/s fails/fail to establish and prove the said important aspect of physical movement of the goods alleged to have been purchased by it/them from the concerned dealers and on which the ITC have been claimed, the Assessing Officer is absolutely justified in rejecting such ITC claim.
In view of the above, the ITC claim of the Appellant was rejected despite providing tax invoices and proof of payment via cheque.
The State of Karnataka v M/s Ecom Gill Coffee Trading Pvt Ltd – Supreme Court