In the matter of Input Tax Credit (ITC) Reversal and Disallowance, the Madras High Court directed the GST Department to reassess in the light of Supreme Court (SC) Decision.
The petitioner in the present matter is M/s.CBC Fashions (Asia) Private Limited.
Both the Counsels concurred on the position that the issue arising in these matters relates to (i) the disallowance of Input Tax Credit (ITC) arising out of the alleged mismatch between the returns filed by the petitioners when compared with the returns and annexures filed by the purchasing / selling third party dealers and (ii) reversal of ITC on the allegations that there has been no actual movement of goods qua the transactions in question.
A Bench of Dr Justice Anita Sumanth observed that with regard to the first issue a Bench of the Court in the case of M/s.JKM Graphics Solutions Private Limited v Commercial Tax Officer had issued certain directions for conduct of verification and assessment in such matters.
The Court commented that while some of these directions have been complied with in the present cases, learned counsel concur on the position that there are other conditions that have been set out under Circular No.5 of 2021 dated 24.02.2021 that yet remain to be complied and hence, the impugned assessments are to be re-done in light of Circular No.5 of 2021.
In relation to the second issue, the Court noted that “the issue relating to movement of goods has been the subject-matter of detailed deliberations in a batch of cases, wherein orders have been reserved by the Tax Bench on 01.12.2022. In the interregnum, the Supreme Court has also had occasion to pronounce judgment in the case of State of Karnataka v M/s Ecom Gill Coffee Trading Private Limited in the same issue, though in the context of the Karntatka Value Added Tax Act.”
The Court directed the assessing authority to complete the assessments thereafter in light of the judgment of the Supreme Court in Ecom Gill Coffee Trading Private Limited.
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