Lwg Industries Limited And Another vs. Union Of INDIA And Others

Held

The Court decided to remand the cases back to the respondent GST authorities for fresh consideration. The Court found that based on the recorded facts, it could not be definitively said that the petitioners failed to comply with their statutory obligations regarding verification of suppliers' genuineness before entering into the transactions. The Court directed the respondents to re-examine the petitioners' entitlement to ITC by considering all supporting documents for the genuineness of the transactions. Specifically, the authorities must verify whether payments for the purchases, including GST, were actually made to the suppliers (RTP), whether the transactions occurred before or after the suppliers' registration cancellations, and whether the petitioners fulfilled their statutory obligations in verifying the suppliers' identities. If, after this verification, the purchases and transactions are found to be genuine, supported by valid documents, and occurred before the cancellation of suppliers' registrations, and considering relevant Supreme Court and High Court judgments, the petitioners would be granted the benefit of ITC. The respondents are to pass a reasoned and speaking order after providing an effective opportunity of hearing to the petitioners and dealing with the judgments relied upon by the petitioners, within eight weeks.

Facts

The petitioners, M/s LGW Industries Limited & Ors., Anmol Industries Ltd. & Anr., Surya Alloy Industries Ltd. & Anr., Raj Metal Industries & Anr., and Victoria Global & Anr., are aggrieved by notices issued by GST authorities. These notices proposed to deny them input tax credit (ITC) on purchases from certain suppliers and demanded payment of penalty and interest. The authorities' case is that the suppliers were fake, their bank accounts were opened using forged documents, and the petitioners failed to verify the suppliers' genuineness. Further, the suppliers' registrations were cancelled retrospectively, covering the transaction periods. The petitioners contend their transactions were genuine, supported by documents, and they exercised due diligence, relying on the suppliers' valid registrations shown on the government portal at the time of transactions. They also stated that payments were made through banking channels, not cash, and invoices were available on the GST portal in GSTR-2A.

Key Issues

1. Whether the petitioners, as purchasers, are entitled to the benefit of input tax credit (ITC) when the suppliers from whom they purchased goods are subsequently found to be fake or non-existent, and their registrations have been cancelled retrospectively, despite the petitioners having relied on the suppliers' valid registrations displayed on the government portal at the time of the transactions? (Question of mixed law and fact, turning on Section 16(2)(c) of the CGST/WBGST Act, and principles of due diligence). Petitioner's Arguments: The petitioners argued that their transactions were genuine and valid, supported by all required documents. They contended that they exercised due diligence and verified the suppliers' genuineness, especially since the suppliers were listed as Registered Taxable Persons (RTP) on the government portal at the time of the transactions. They submitted that they have limited ability to ascertain the ultimate validity of suppliers and cannot be faulted if suppliers later appear fake. They also stated that payments were made through banking channels and that invoices were available on the GST portal (GSTR-2A). They relied on several High Court and Supreme Court judgments, including Commissioner of C. Ex. East Singhbhum v. Tata Motors Ltd., R.S. Infra-Transmission Ltd. v. State of Rajasthan, and Commissioner of Trade & Taxes, Delhi & 66 Ors. v. Arise India Limited & Ors. Revenue's Arguments: The respondents (GST authorities) argued that the suppliers were fake, their bank accounts were opened with forged documents, and the petitioners failed to verify the suppliers' identity and genuineness before transacting. They also pointed to the retrospective cancellation of the suppliers' registrations. They relied on decisions such as P. R. Mani Electronics v. Union of India, ALD Automotive Pvt. Ltd. v. The Commercial Tax Officer, and Jayram & Co. v. Assistant Commissioner & Ors.