GST Update

???? Desk of CA. Praveen Sharma – 1002 Series (CAPS) ????

MADRAS HIGH COURT IN THE CASE OF Balajee Udyog Represented by its Proprietor Sanjay Mittal

GST Registration Cancellation Upheld by Court Due to Lack of Proof of Goods Movement

In a recent case, the court upheld the cancellation of GST registration of a taxpayer who failed to prove the actual movement of goods despite claiming a huge amount of Input Tax Credit (ITC).

The taxpayer had obtained GST registration in April 2022 and later claimed ITC of more than ?18 crore. However, during inspection, the department found that the business premises were not adequate for handling such large transactions. A show cause notice was issued asking the taxpayer to provide proof of actual movement of goods and supporting documents.

Although the taxpayer submitted replies and appeared for a personal hearing, the authorities were not satisfied. The key issue was that the taxpayer relied mainly on e-way bills, but failed to provide essential documents like transport receipts, freight bills, or loading and unloading details to prove physical movement of goods.

The taxpayer argued that sharing business premises with another firm is legally allowed and cannot be a ground for cancellation. However, the department suspected that such arrangements were used to camouflage transactions and claim fake ITC.

The court observed that mere documentation like e-way bills is not sufficient unless supported by actual evidence of goods movement. Since the taxpayer failed to prove genuine transactions, the authorities were justified in cancelling the GST registration under Section 29 of the GST Act.

The court also noted that the government has the power to take strict action in cases involving fake invoices and wrongful ITC claims, and such actions are necessary to protect revenue.

Finally, the court dismissed the appeal and confirmed that GST registration can be cancelled if ITC is claimed without proper supporting evidence of genuine business activity.

LINK:CA. Praveen Sharma on Linkedin

Regards
CAPS