M/S Lgw Industries LTD & Ors vs. Union Of INDIA & Ors

Held

The Court held that based on the recorded facts and subject to further verification, it could not be definitively stated that the petitioners had failed to comply with their statutory obligations regarding the verification of suppliers' genuineness before entering into the transactions. The Court considered the submissions of both parties and the available records. It found that the issue required further examination of the documents and compliance with statutory obligations. Consequently, the Court decided to remand the cases back to the respondent GST authorities. The authorities are directed to re-examine the petitioners' entitlement to ITC by considering the documents submitted by the petitioners to prove the genuineness of the transactions. They must also ascertain whether payments for purchases, including GST, were actually made to the suppliers, whether transactions occurred before or after the suppliers' registration cancellations, and the extent of the petitioners' compliance with their statutory duty to verify supplier identities. If, after this re-examination, the purchases and transactions are found to be genuine, supported by valid documents, and made before registration cancellation, and considering relevant Supreme Court and High Court judgments, the petitioners will be granted the benefit of ITC. The authorities are to pass a reasoned order after providing an effective opportunity of hearing to 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 refused them Input Tax Credit (ITC) on purchases from certain suppliers and demanded payment of penalty and interest. The authorities' contention was that the suppliers were fake, their bank accounts opened with forged documents, and the petitioners had not verified the suppliers' genuineness. Furthermore, the suppliers' GST registrations were cancelled retrospectively, covering the transaction periods. The petitioners argued that their transactions were genuine, supported by documents, and they had 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 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 GST authorities allege that their suppliers are fake and non-existent, and their registrations have been cancelled retrospectively, despite the petitioners claiming to have exercised due diligence and relied on valid registrations shown on the government portal at the time of transactions? Petitioner's Arguments: The petitioners contended that their transactions were genuine and valid, supported by all necessary documents. They asserted that they had performed due diligence and verified the suppliers' genuineness, especially since the suppliers were listed as Registered Taxable Persons (RTPs) on the government portal. They argued that they had limited means to ascertain the ultimate validity of suppliers if they appeared genuine initially and that payments were made through banking channels. They further submitted that invoices were available on the GST portal in GSTR-2A and they should not be penalized unless collusion between them and the suppliers is established with concrete evidence. Revenue's Arguments: The respondents (GST authorities) argued that the suppliers were fake and non-existent, operating with bank accounts opened on forged documents. They claimed the petitioners failed to verify the genuineness and identity of these suppliers before transacting and that the suppliers' registrations were cancelled retrospectively, covering the transaction periods.