Very Important Judgment From Patna HC…

Very Important Judgment From Patna HC

📢 Ineligibility for Input Tax Credit Due to the Supplier’s unpaid taxes to the Government

➡️ Important Points from “M/s AASTHA ENTERPRISES Vs THE STATE OF BIHAR” Judgment

1. Conditions for Input Tax Credit (ITC): The judgment emphasizes that ITC is a benefit provided under the statute to avoid tax cascading. For a purchasing dealer to claim ITC, they must fulfill all conditions listed in Section 16(2) of the CGST Act, including sub-clause (c), which requires actual payment of tax by the selling dealer to the government.
2. Sequential Compliance: The conditions for ITC in clauses (a), (b), and (c) of Section 16(2) must be satisfied together, not separately. The nomenclature of ITC implies that credit is available in the purchasing dealer’s ledger upon tax payment by the supplier to the government.
3. Burden of Proof: The purchasing dealer claiming ITC must prove that the supplier collected tax from them and actually paid it to the government. This is a statutory requirement that must be fulfilled by the purchasing dealer to avail ITC.
4. Liability and Recovery: Mere existence of recovery provisions doesn’t absolve the purchasing dealer’s liability to ensure complete tax payment to the government. If the supplier fails to pay the collected tax, the purchasing dealer cannot claim ITC unless the supplier’s tax is settled.
5. No Double Taxation: The court rejects the argument of double taxation. Taxation is mandatory for public welfare, and it’s only when the collected tax reaches the government that the liability is satisfied. Hence, the failure to pay the collected tax results in no valid claim for ITC and not double taxation.

[Civil Writ Jurisdiction Case No.10395 of 2023]