Case No. 10395/2023 (High Court - Patna): Aastha Enterprises v. State of Bihar.

The AASTHA ENTERPRISES VS. STATE OF BIHAR case in 2023, as heard by the High Court in Patna, delves into crucial aspects of the Input Tax Credit (ITC) and its denial. In this article, we will explore the court's decision and its implications for businesses and taxpayers.

 

Conditions for ITC Claim

The High Court in this case emphasized that claiming ITC is subject to strict conditions. The Court highlighted that the provisions of Section 16 of the CGST Act, 2017 must be collectively satisfied. This means that simply producing a tax invoice, providing proof of goods movement, receipt of goods, and payment through bank accounts are not sufficient in isolation to claim ITC.

 

Burden of Proof

One essential aspect of the Court's decision is the burden of proof. It lies with the purchasing dealer to demonstrate whether the selling dealer remitted the collected tax amount to the government. In other words, purchasing dealers must ensure that the tax collected by the selling dealer has indeed been paid to the Government, and they need to provide evidence to support their claim.

 

No Cascading Effect

The Court clarified that the denial of ITC does not lead to a cascading effect. Cascading only occurs when the selling dealer, who collected tax, fails to remit it to the Government. This ruling ensures that the responsibility for the remittance of the collected tax rests primarily with the selling dealer.

 

Dependence on Selling Dealer

This case's decision underscores that both the tax levy and ITC benefit for the purchasing dealer depend on both the collection and payment of the collected tax by the selling dealer to the Government. If the supplier fails to fulfill these statutory requirements, the purchasing dealer cannot claim ITC. Therefore, it is essential for purchasing dealers to verify the tax remittance by the selling dealer.

 

Recovery from Selling Dealer

The Court noted that while GST laws enable the recovery of collected tax from the selling dealer, this does not absolve the taxpayer from fulfilling their entire tax liability to the Government. The Court ruled that unless the tax paid by the purchaser to the supplier is remitted to the Government by the supplier, the purchaser cannot claim ITC under the statute. Purchasing dealers may explore seeking a refund if the Government recovers amounts from the selling dealer at a later time.

 

Conclusion

The AASTHA ENTERPRISES VS. STATE OF BIHAR 2023 case, decided by the High Court in Patna, provides critical insights into the conditions and requirements for claiming Input Tax Credit (ITC). Businesses and taxpayers must be aware of these requirements and ensure that they can substantiate their claims, with a clear understanding of the burden of proof placed on them. This case sets a precedent that emphasizes compliance with tax regulations and the responsibility of selling dealers to remit collected taxes. It also reinforces that ITC is a concession, not an inherent right, under the statutory scheme, highlighting the importance of adherence to the law's requirements.

To read the complete judgment  Click here