Subsequent non-existence of supplier cannot invalidate past ITC; HC remands case for evidence consideration.
Issue
Whether Input Tax Credit (ITC) can be denied to a purchaser solely on the ground that the supplier was found non-existent during a physical verification conducted years after the transaction, especially when the adjudicating authority disregards the documentary evidence of genuine purchase and payment submitted by the assessee.
Facts
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The assessee, Parshv Industries LLP, availed ITC on purchases made during the Financial Year 2018-19.
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The GST department conducted a physical verification of the supplier’s premises much later, in June 2024, and found the supplier to be non-existent.
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Based on this subsequent non-existence, the Assistant Commissioner raised a demand for ITC reversal.
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During the adjudication, the assessee submitted substantial documentary evidence to prove the genuineness of the transactions, including tax invoices, e-way bills, GST returns, and proof of payment through banking channels.
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The Assistant Commissioner ignored this evidence and the case laws cited by the assessee, holding them “irrelevant” simply because the supplier was found non-existent in 2024.
Decision
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The Bombay High Court (Nagpur Bench) quashed and set aside the demand order passed by the Assistant Commissioner.
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The Court highlighted the substantial time gap between the transaction period (FY 2018-19) and the date of physical verification (June 2024).
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It held that a supplier’s non-existence in 2024 cannot automatically lead to the presumption that they did not exist or conduct business in 2018-19.
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The Court ruled that the adjudicating authority committed a gross error by brushing aside the documentary evidence (invoices, e-way bills, payments) without examination.
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The matter was remanded back to the Assistant Commissioner for a fresh decision, with a strict direction to consider all documentary evidence and legal precedents furnished by the assessee.
Key Takeaways
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Temporal Gap Matters: A supplier found non-existent today does not prove they were non-existent in the past. Authorities cannot retrospectively deny ITC based on a verification conducted years after the actual supply.
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Evidence Must Be Weighed: Adjudicating authorities have a legal duty to examine documentary proofs like e-way bills and bank statements. Dismissing them as “irrelevant” without analysis renders the order unsustainable.
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Natural Justice: The failure to consider material evidence and binding judicial precedents is a violation of the principles of adjudication and natural justice.
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Writ Jurisdiction: The High Court clarified that when an authority fails to consider material evidence on record, it constitutes an error apparent on the face of the record, justifying judicial interference via a writ petition even if a statutory appeal remedy exists.