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
The assessee, Parshv Industries LLP, availed ITC on purchases made during the Financial Year 2018-19.
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.
Based on this subsequent non-existence, the Assistant Commissioner raised a demand for ITC reversal.
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.
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
The Bombay High Court (Nagpur Bench) quashed and set aside the demand order passed by the Assistant Commissioner.
The Court highlighted the substantial time gap between the transaction period (FY 2018-19) and the date of physical verification (June 2024).
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.
The Court ruled that the adjudicating authority committed a gross error by brushing aside the documentary evidence (invoices, e-way bills, payments) without examination.
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
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.
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.
Natural Justice: The failure to consider material evidence and binding judicial precedents is a violation of the principles of adjudication and natural justice.
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.