M/S Sane Retails Private Limited vs. The State Of Bihar

Held

The Court held that the receipt of goods by a dealer from a supplier does not necessarily require physical possession. The Court found that if the dealer informs the competent authority about an agreement or memorandum of understanding with the supplier and the end consumer, and intimates the end consumer regarding the purchase and delivery of goods, the dealer shall be deemed to have 'received' such goods for the purpose of Section 16(2)(b) of the CGST Act. The Court noted that the condition that goods should be used for the purpose of and in furtherance of business, subject to other conditions of Sections 16 and 17, must also be fulfilled. The Court found that the cited decisions relied upon by the respondents were not relevant to the interpretation of Section 16(2)(b) concerning the mode of receipt of goods. The Court set aside the impugned orders and remanded the matter to the Deputy Commissioner of State Tax to re-examine the compliance with Section 16(2)(b) by verifying the existence of a memorandum of understanding between the petitioner and the supplier, and any materials informing the end consumer about the receipt of goods (delivery by the supplier directly or through a transporter). If these materials favored the petitioner, the grievance was to be redressed accordingly. The entire exercise was to be completed within six months.

Facts

The petitioners, M/s Sane Retails Private Limited and M/s Bathla Teletech Pvt. Ltd., along with other entities, filed writ petitions challenging orders passed by GST authorities. The core issue revolved around the eligibility for Input Tax Credit (ITC) concerning goods that were purchased by the petitioner from a supplier but were directly delivered to an end consumer at the petitioner's instruction. The petitioners contended that they had fulfilled the conditions for ITC, including the deemed receipt of goods as per Section 16(2)(b) of the CGST Act, and that the suppliers had deposited the collected tax. The authorities had denied ITC, leading to the present litigation.

Key Issues

1. Whether the petitioners are entitled to claim Input Tax Credit (ITC) under Section 16(1) of the CGST Act, 2017, when goods purchased by them were delivered directly by the supplier to the end consumer, as per the petitioner's instructions, and not physically received by the petitioner. 2. Whether the conditions stipulated in Section 16(2)(b) of the CGST Act, 2017, regarding the receipt of goods, are satisfied when the goods are delivered to a third party (end consumer) on the direction of the registered person (petitioner). Petitioner's Arguments: The petitioners argued that they had fulfilled the requirements for claiming ITC. They contended that under Section 16(2)(b) of the CGST Act, receipt of goods by the dealer does not necessarily require physical possession, especially when there is an agreement with the supplier to deliver directly to the end consumer. They asserted that they had provided sufficient material information, including any memorandum of understanding or agreement, and intimated the end consumer about the transaction. They also stated that the suppliers had deposited the tax collected from them, which was not disputed by the revenue. Revenue's Arguments: The judgment does not explicitly record arguments made by the revenue or State respondents.