# Trendships Online Services Private Ltd v. Commissioner Commercial Tax U.P. at Lucknow & Anr

- **Citation:** (2025) 5 ILRA 254
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2025-05-26
- **Case number:** Writ Tax No. 501 of 2023
- **Bench:** Rohit Ranjan Agarwal
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/trendships-online-services-private-ltd-v-commissioner-commercial-tax-u-p-at-53351
- **Pages:** 12

## Headnote

(A) Taxation Law - GST - Input Tax
Credit - U.P. Goods and Services Tax
Act, 2017 /Central Goods and Services
Tax Act,
2017
- Section 16(2)(c),
41,43A & 74 - eligibility and condition
for input tax credit (ITC) - "Tax
charged in respect of such supply has
been actually paid to Government" -
Burden of proof upon purchasing dealer
-
eligibility
to
ITC
under
Section
16(2)(c) is subject to actual deposit of
tax by supplier - Mere production of tax
invoice and payment through banking
channel not sufficient - Burden lies on
purchasing dealer to prove genuineness
of transaction and actual movement of
goods - Failure to prove deposit of tax
by supplier disentitles purchaser from
claiming ITC - Section 74 mechanism
operates to recover wrongly availed ITC
- Preventive scheme under GST to curb
bogus/fraudulent
ITC
claims
emphasised - Compliance of Section
16(2)(c) mandatory - burden on dealer
cannot shift to Revenue - ITC claim
unsustainable where supplier fails to
deposit tax and purchaser fails to prove
actual transaction and deposit of tax as
mandated under Section 16(2)(c). (Para
9, 11, 16, 19 to 21, 24, 28 to 31)

Petitioner, a registered dealer under U.P.
GST Act - claimed ITC for 2017-18 on filter
paper purchases from supplier Shree Radhey
International - Supplier's registration was
later cancelled - tax remained unpaid - Tax
authorities demanded reversal via Section 74
notice - appellate authority upheld demand.
(Para 1 to 3 ,27 to 31)

HELD: - Petitioner failed to establish that
supplier deposited tax with Government as
required
by
Section16(2)(c).
Mere
production of tax invoice and payment
through banking channel not sufficient.
Burden
of
proof
to
establish
actual
transaction, physical movement of goods,
and tax deposit lies on purchasing dealer.
Authorities
rightly
reversed
ITC
under
Section 74. No interference warranted.
Interim order discharged. (Para - 19 to 21,
28 to 31, 33 to 36)

Petition dismissed. (E-7)

List of Cases cited:

## Text

254 INDIAN LAW REPORTS ALLAHABAD SERIES
passed
by
the
Presiding
Officer,
Commercial Court, Varanasi in Original
Suit No.10 of 2025 is set aside in toto. The
matter is remitted back to the Commercial
Court, Varanasi to decide the application
under Section 12-A of the Act after
granting opportunity of hearing to both the
parties and deal with the matter as per its
determination.
----------
(2025) 5 ILRA 254
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 26.05.2025

BEFORE

THE HON'BLE ROHIT RANJAN AGARWAL, J.

Writ Tax No. 501 of 2023

Trendships Online Services Private Ltd.
 ...Petitioner
Versus
Commissioner Commercial Tax U.P. at
Lucknow & Anr. ...Respondents

Counsel for the Petitioner:
Pooja Talwar

Counsel for the Respondents:
C.S.C.

(A) Taxation Law - GST - Input Tax
Credit - U.P. Goods and Services Tax
Act, 2017 /Central Goods and Services
Tax Act,
2017
- Section 16(2)(c),
41,43A & 74 - eligibility and condition
for input tax credit (ITC) - "Tax
charged in respect of such supply has
been actually paid to Government" -
Burden of proof upon purchasing dealer
-
eligibility
to
ITC
under
Section
16(2)(c) is subject to actual deposit of
tax by supplier - Mere production of tax
invoice and payment through banking
channel not sufficient - Burden lies on
purchasing dealer to prove genuineness
of transaction and actual movement of
goods - Failure to prove deposit of tax
by supplier disentitles purchaser from
claiming ITC - Section 74 mechanism
operates to recover wrongly availed ITC
- Preventive scheme under GST to curb
bogus/fraudulent
ITC
claims
emphasised - Compliance of Section
16(2)(c) mandatory - burden on dealer
cannot shift to Revenue - ITC claim
unsustainable where supplier fails to
deposit tax and purchaser fails to prove
actual transaction and deposit of tax as
mandated under Section 16(2)(c). (Para
9, 11, 16, 19 to 21, 24, 28 to 31)

Petitioner, a registered dealer under U.P.
GST Act - claimed ITC for 2017-18 on filter
paper purchases from supplier Shree Radhey
International - Supplier's registration was
later cancelled - tax remained unpaid - Tax
authorities demanded reversal via Section 74
notice - appellate authority upheld demand.
(Para 1 to 3 ,27 to 31)

HELD: - Petitioner failed to establish that
supplier deposited tax with Government as
required
by
Section16(2)(c).
Mere
production of tax invoice and payment
through banking channel not sufficient.
Burden
of
proof
to
establish
actual
transaction, physical movement of goods,
and tax deposit lies on purchasing dealer.
Authorities
rightly
reversed
ITC
under
Section 74. No interference warranted.
Interim order discharged. (Para - 19 to 21,
28 to 31, 33 to 36)

Petition dismissed. (E-7)

List of Cases cited:

1.
M/s
Solvi
Enterprises
Vs
Additional
Commissioner Grade II & anr., Writ Tax No.
1287 of 2024

2. Suncraft Energy Pvt. Ltd. & anr. Vs The
Assistant Commissioner, St. Tax, MAT 1218 of
2023

3. Rimjhim Ispat Ltd. Vs U.O.I. & ors., Writ Tax
No. 1611 of 2022

4. Ajnara Realtech Ltd. Vs St. of U.P. & ors.,
2025 NTN (Vol. 87) 521
5 All. Trendships Online Services Private Ltd. Vs. Commissioner Commercial Tax U.P. at Lucknow & Anr.
255
5. Commissioner of Central Excise, Customs &
Service Tax Vs Juhi Alloys Ltd., 2014 (302) ELT
487

6. M/s D. Y. Beathel Enterprises Vs St. Tax
Officer, W.P. (MD) Nos. 2127 of 2021

7. Pinstar Automotive India Pvt. Ltd. Vs
Additional Commissioner, W.P. No. 8493 of 2023
& WMP No. 8686 of 2023

8. M/s LGW Industries Ltd. & ors. Vs U.O.I. &
ors., WPA No. 23512 of 2019

9. M/s. Bright Star Plastic Industries Vs
Additional Commissioner of Sales Tax, W.P.(C)
No. 15265 of 2021

10. Bhagyanagar Copper Pvt. Ltd. Vs CBIC,
2022 UPTC (Vol. 110) 261

11. M/s Choksi Exports Vs U.O.I. , 2023 UPTC
428.

12. The St. of Karn. Vs M/s Ecom Gill Coffee
Trading Pvt. Ltd., Civil Appeal No. 230 of 2023,

13. M/s Shiv Trading Vs St. of U.P. & ors., Writ
Tax No. 1421 of 2022

(Delivered by Hon'ble Rohit Ranjan
Agarwal, J.)

1. Petitioner, before this Court, is a
registered dealer under U.P. Goods and
Services
Tax
Act,
2017
(hereinafter
referred as "U.P. GST, 2017"). It is
engaged in providing soil testing services
for preparation of soil health guard to
Government of U.P.

2. Petitioner made purchase of whatman filter paper required for soil testing
from one Shree Radhey International,
Delhi, who at the time when the sale was
made was also a registered dealer.
According to petitioner, payment for entire
purchase so made was through the banking
channel from March to April, 2018. The
goods purchased were against tax invoices
and it was declared by petitioner in its
GSTR-3B return for the period in question.
Input tax credit on output tax liability was
claimed and for input tax credit, credit was
availed.

3.
A
show-cause
notice
dated
06.09.2021 was issued for financial year
2017-18 by Assistant Commissioner, State
Tax, Block-3, Jhansi under Section 74(1) of
the Act of 2017. A reply was submitted on
05.10.2021, thereafter, an order under
Section 74(9) was passed demanding
tax/interest and penalty on 17.12.2021. The
order was subjected to appeal by petitioner
before Additional Commissioner, Grade-II
(Appeal) IInd, Commercial Tax, Jhansi
who dismissed the same on 20.12.2022.
Hence, this writ petition.

4. Ms. Pooja Talwar, counsel for
petitioner
submitted
that
when
the
transaction had taken place and the goods
were purchased from the supplier firm
Shree Radhey International, which was a
registered firm under the Act, all the
payments were made through RTGS and
filter paper so purchased was brought in the
car of petitioner itself and no help of
outside transportation was taken up. The
registration of Shree Radhey International
was cancelled on 11.09.2019 while the
transaction had taken place between March
and April, 2018. According to her,
necessary documents for claiming ITC
were provided pursuant to which the
benefit was accorded and there stood no
occasion for reversing the ITC availed by
the petitioner. It is the fault of the supplier
firm who had not deposited the tax so
calculated and not of the recipient firm.

5. She has relied upon a decision of
co-ordinate Bench of this Court in case of
256 INDIAN LAW REPORTS ALLAHABAD SERIES
M/s Solvi Enterprises vs. Additional
Commissioner Grade II and another,
Writ Tax No. 1287 of 2024, decided on
24.03.2025 and judgment of Division
Bench of Calcutta High Court rendered in
case of Suncraft Energy Private Limited
and
another
vs.
The
Assistant
Commissioner, State Tax, MAT 1218 of
2023, decided on 02.08.2023. She has also
relied upon an interim order granted by
Division Bench of this Court in case of
Rimjhim Ispat Ltd. vs. Union of India
and others, Writ Tax No. 1611 of 2022 on
30.01.2023, wherein a show-cause notice
issued to assessee was stayed on the ground
that vires of Section 16(2)(c) of Central
Goods and Services Tax Act, 2017
(hereinafter referred as "the Central Act,
2017") was under challenge.

6. Reliance has also been placed upon
judgment of Division Bench of this Court
in case of Ajnara Realtech Limited vs.
Sate of U.P. and 3 others, 2025 NTN
(Vol. 87) 521 and Commissioner of
Central Excise, Customs & Service Tax
vs. Juhi Alloys Ltd., 2014 (302) ELT 487;
judgment of Madras High Court in case of
M/s D. Y. Beathel Enterprises vs. State
Tax Officer, W.P. (MD) Nos. 2127 of
2021, decided on 24.02.2021 and Pinstar
Automotive
India
Pvt.
Ltd.
vs.
Additional Commissioner, W.P. No. 8493
of 2023 and WMP No. 8686 of 2023,
decided on 20.03.2023; judgment of
Calcutta High Court in case of M/s LGW
Industries Limited & others vs. Union of
India & others, WPA No. 23512 of 2019,
decided on 13.12.2021; judgment of Orissa
High Court in case of M/s. Bright Star
Plastic
Industries
vs.
Additional
Commissioner of Sales Tax, W.P.(C) No.
15265 of 2021, decided on 04.10.2021;
judgment of Telangana High Court in case
of Bhagyanagar Copper Pvt. Ltd. vs.
CBIC, 2022 UPTC (Vol. 110) 261 and
judgment of Gujarat High Court in case of
M/s Choksi Exports vs. Union of India
2023 UPTC 428.

7. Sri Arvind Kumar Mishra, learned
Standing Counsel submitted that Section
16(2)(c) of the Central Act, 2017 clearly
provides that subject to the provisions of
Section 41, the tax charged in respect of
such supply has been actually paid to the
Government either in cash or through
utilisation of input tax credit then only ITC
can be availed. According to him, the
petitioner could not place any prove before
the authorities pursuant to issuance of
notice under Section 74 that transaction
was bona fide and tax invoice along with
transportation of goods and tax deposited
by supplier firm was placed. According
to him, Assessing Authority had rightly
repelled the contention of petitioner and
ordered for payment of taxes along with
interest and penalty. Reliance has been
placed upon the decision of Apex Court
rendered in case of The State of
Karnataka vs. M/s Ecom Gill Coffee
Trading
Private
Limited,
Civil
Appeal No. 230 of 2023, decided on
13.03.2023 as well as decision of coordinate Bench rendered in M/s Shiv
Trading vs. State of U.P. and 2
others, Writ Tax No. 1421 of 2022,
decided on 28.11.2023.

8. I have heard respective counsel for
the parties and perused the material on
record.

9. The short point for consideration is
as to whether the petitioner is entitled for
input tax credit for alleged transaction
having been taken place between the
supplier, Shree Radhey International, Delhi
and petitioner in the year 2018.
5 All. Trendships Online Services Private Ltd. Vs. Commissioner Commercial Tax U.P. at Lucknow & Anr.
257

10. Before delving into question of
eligibility, condition and availment of input
tax credit, a glance of Section 16 and
unamended provisions of Section 41 are
necessary for better appreciation of the
case, which are extracted hereasunder:-

"16. Eligibility and conditions
for taking input tax credit

 (1)
Every
registered
person
shall, subject to such conditions and
restrictions as may be prescribed and in the
manner specified in section 49, be entitled
to take credit of input tax charged on any
supply of goods or services or both to him
which are used or intended to be used in
the course or furtherance of his business
and the said amount shall be credited to the
electronic credit ledger of such person.

 (2)
Notwithstanding
anything
contained in this section, no registered
person shall be entitled to the credit of any
input tax in respect of any supply of goods
or services or both to him unless, -

 (a) he is in possession of a tax
invoice or debit note issued by a supplier
registered under this Act, or such other tax
paying documents as may be prescribed;

[(aa) the details of the invoice or
debit note referred to in clause (a) has been
furnished by the supplier in the statement of
outward supplies and such details have
been communicated to the recipient of such
invoice or debit note in the manner
specified under section 37;]

 (b) he has received the goods or
services or both.

[Explanation : For the purposes
of this clause, it shall be deemed that the
registered person has received the goods
or, as the case may be, services -

(i) where the goods are delivered
by the supplier to a recipient or any other
person on the direction of such registered
person, whether acting as an agent or
otherwise, before or during movement of
goods, either by way of transfer of
documents of title to goods or otherwise;

(ii)
where
the
services
are
provided by the supplier to any person on
the direction of and on account of such
registered person.];

 [(ba) the details of input tax
credit in respect of the said supply
communicated to such registered person
under Section 38 has not been restricted;]

(c) subject to the provisions of
[section 41 [***]], the tax charged in
respect of such supply has been actually
paid to the Government, either in cash or
through utilisation of input tax credit
admissible in respect of the said supply;
and

(d) he has furnished the return
under section 39:

PROVIDED that where the goods
against an invoice are received in lots or
instalments, the registered person shall be
entitled to take credit upon receipt of the
last lot or instalment:

PROVIDED
FURTHER
that
where a recipient fails to pay to the
supplier of goods or services or both, other
than the supplies on which tax is payable
on reverse charge basis, the amount
towards the value of supply along with tax
payable thereon within a period of one
hundred and eighty days from the date of
issue of invoice by the supplier, an amount
equal to the input tax credit availed by the
recipient shall be [paid by him along with
interest payable under section 50], in such
manner as may be prescribed::

PROVIDED
ALSO
that
the
recipient shall be entitled to avail of the
credit of input tax on payment made by him
7[to the supplier] of the amount towards
the value of supply of goods or services or
both along with tax payable thereon.

 (3) ********
258 INDIAN LAW REPORTS ALLAHABAD SERIES

(4) *******

41. Claim of input tax credit and
provisional acceptance thereof

(1) Every registered person shall,
subject to such conditions and restrictions
as may be prescribed, be entitled to take
the credit of eligible input tax, as selfassessed, in his return and such amount
shall be credited on a provisional basis to
his electronic credit ledger.

(2) The credit referred to in subsection (1) shall be utilised only for
payment of self-assessed output tax as per
the return referred to in the said subsection."

11. Sub-section (2) of Section 16 is a
non
obstante
clause
stating
that
notwithstanding anything contained in
Section 16, no registered dealer shall be
entitled to credit of any input tax in respect
of any supply of goods or services or both
to them unless, - (a) he is in possession of a
tax invoice or debit note issued by supplier
registered under the Act, or such other tax
paying documents as may be prescribed.
Further, (b) he has received the goods or
services or both and (c) subject to the
provisions of section 41 or 43A, the tax
charged in respect of such supply has been
actually paid to the Government, either in
cash or through utilisation of input tax
credit admissible in respect of the said
supply. Lastly, (d) he has furnished the
return under section 39.

12. Section 16(2) was amended and
sub-section (2)(c) was amended to the
extent that the words "or Section 43A"
were omitted by Finance Act, 2022 w.e.f.
01.10.2022. Moreover, Section 41 which
previously dealt with "claim of input tax
credit and provisional acceptance thereof"
was also substituted by Finance Act, 2022
w.e.f. 01.10.2022 with "availment of input
tax credit".

13. The amended provision of Section
41 and Section 43A which was omitted are
extracted hereasunder:-

"41. Availment of input tax
credit.-(1) Every registered person shall,
subject to such conditions and restrictions
as may be prescribed, be entitled to avail
the credit of eligible input tax, as selfassessed, in his return and such amount
shall be credited to his electronic credit
ledger.

 (2) The credit of input tax
availed by a registered person under subsection (1) in respect of such supplies of
goods or services or both, the tax payable
whereon has not been paid by the supplier,
shall be reversed along with applicable
interest, by the said person in such manner
as may be prescribed:

PROVIDED that where the said
supplier makes payment of the tax payable
in respect of the aforesaid supplies, the
said registered person may re-avail the
amount of credit reversed by him in such
manner as may be prescribed.]

"43A. Procedure for furnishing
return and availing input tax credit

(1)
Notwithstanding
anything
contained in sub-section (2) of section 16,
section 37 or section 38, every registered
person shall in the returns furnished under
sub-section (1) of section 39 verify,
validate, modify or delete the details of
supplies furnished by the suppliers.

(2)
Notwithstanding
anything
contained in section 41, section 42 or
section 43, the procedure for availing of
input tax credit by the recipient and
verification thereof shall be such as may be
prescribed.
5 All. Trendships Online Services Private Ltd. Vs. Commissioner Commercial Tax U.P. at Lucknow & Anr.
259

 (3) The procedure for furnishing
the details of outward supplies by the
supplier on the common portal, for the
purposes of availing input tax credit by the
recipient shall be such as may be
prescribed.

(4) The procedure for availing
input tax credit in respect of outward
supplies not furnished under sub-section
(3) shall be such as may be prescribed and
such procedure may include the maximum
amount of the input tax credit which can be
so availed, not exceeding twenty per cent.
of the input tax credit available, on the
basis of details furnished by the suppliers
under the said sub-section.

(5) The amount of tax specified in
the outward supplies for which the details
have been furnished by the supplier under
sub-section (3) shall be deemed to be the
tax payable by him under the provisions of
the Act.

(6) The supplier and the recipient
of a supply shall be jointly and severally
liable to pay tax or to pay the input tax
credit availed, as the case may be, in
relation to outward supplies for which the
details have been furnished under subsection (3) or sub-section (4) but return
thereof has not been furnished.

(7) For the purposes of subsection (6), the recovery shall be made in
such manner as may be prescribed and
such procedure may provide for nonrecovery of an amount of tax or input tax
credit wrongly availed not exceeding one
thousand rupees.

(8) The procedure, safeguards
and threshold of the tax amount in relation
to outward supplies, the details of which
can be furnished under sub-section (3) by a
registered person,-

(i) within six months of taking
registration;

(ii) who has defaulted in payment
of tax and where such default has
continued for more than two months from
the due date of payment of such defaulted
amount, shall be such as may be
prescribed."

14. Though, in the instant case, the
dispute relates to the transaction which had
taken place in the year 2018 and only the
provisions which were applicable at that
time are relevant for consideration, but a
brief glance of the post amended provisions
are also necessary for better appreciation of
the case.

15. Thus, the scheme for availing
input tax credit under the Central Act &
State Act, 2017 has been provided under
Chapter V of the Act and Section 16 lays
down the eligibility and condition for
taking input tax credit. While sub-section
(1) of Section 16 provides that every
registered person subject to conditions and
restrictions as may be prescribed be entitled
to take credit of input tax charged on any
supply of goods or services or both to him
which are used or intended to be used in the
course or furtherance of his business. The
said amount shall be credited to the
electronic credit ledger of such person.

16. However, sub-section (2) restricts
the power and lays down the eligibility and
condition for taking the input tax credit.
Sub-section (2)(c) clearly lays down that
subject to provisions of Section 41 or
43A (which was prior to amendment), the
tax charged in respect of such supply has
been actually paid to the Government by
the supplier. This condition clearly
restricts the power to take the benefit of
input tax credit subject to deposit by
supplier.
260 INDIAN LAW REPORTS ALLAHABAD SERIES

17. The scheme of Section 16 has to
be read in consonance with Section 41 of
the Act of 2017 which prior to amendment
provided for claim of input tax credit and
provisional acceptance thereof. It provided
that subject to condition and restriction as
may be prescribed every registered person
was entitled to take credit of eligible input
tax, meaning thereby that availment of
input tax credit was subject to conditions
and restrictions which were provided under
Section 16.

18. Prior to Finance Act of 2022
whereby Section 43A was omitted provided
for procedure for furnishing return and
availing input tax credit. It also starts with a
non obstante clause and provides that every
registered person shall in the return
furnished under sub-section (1) of section
39 verify, validate, modify or delete the
details of supplies furnished by the
supplier. Thus, the very requirement for
availing the benefit of ITC has to be
considered in the light of Section 16 read
with unamended provision of Section 41
and the provisions of Section 43A before it
stood omitted.

19. In the case in hand, petitioner is
claiming ITC on the basis of supplies made
by Shree Radhey International in the year
2018. Admittedly, only tax invoice was
issued by the supplier. The alleged tax to
have been charged was never deposited by
the supplier and no compliance of Section
16(2)(c) was made. The eligibility and
availment of ITC is subject to deposit of
tax by supplier which is clear from the
reading of sub-section (2)(c).

20. The provision is simple and clear,
and there is no ambiguity as regards actual
payment of tax by supplier to Government.
Once the supplier has not deposited the tax
mandated under sub-section (2)(c) of
Section 16, the petitioner purchaser cannot
claim the benefit.

21. In M/s Solvi Enterprises (supra),
the co-ordinate Bench while dealing with
Section 16 and 74 of the Act had not
noticed the import of sub-section (2)(c)
while granting the benefit of ITC on the
ground that the registration of the seller
dealer was cancelled on the subsequent
date when the transaction had admittedly
taken place.

22. From the reading of the judgment,
it appears that provisions of sub-section
(2)(c) of Section 16 was not brought to the
notice of the Court by State Counsel
appearing in the matter.

23. However, in M/s Shiv Trading
(supra), the co-ordinate Bench while
dealing with similar issue had refused to
grant the benefit of ITC and had relied
upon the decision of Hon'ble Apex Court
rendered in case of M/s Ecom Gill Coffee
Trading Private Limited (supra) and held
as under:-

"9.
The
authorities
have
categorically recorded the fact that the
petitioner failed to show actual movement
of goods and therefore, the judgements
cited by the petitioner, as referred to
hereinabove in the preceding paragraphs,
are of no aid to the petitioner. The
petitioner also could not distinguish the
judgements of the Apex Court in M/s Ecom
Gill Coffee Trading Private Limited
(supra).

10. The Apex Court in M/s Ecom
Gill Coffee Trading Private Limited
(supra) has held as under:-

9.1 Thus, the provisions of
Section 70, quoted hereinabove, in its plain
5 All. Trendships Online Services Private Ltd. Vs. Commissioner Commercial Tax U.P. at Lucknow & Anr.
261
terms clearly stipulate that the burden of
proving that the ITC claim is correct lies upon
the purchasing dealer claiming such ITC.
Burden of proof that the ITC claim is correct
is squarely upon the assessee who has to
discharge the said burden. Merely because the
dealer claiming such ITC claims that he is a
bona fide purchaser is not enough and
sufficient. The burden of proving the
correctness of ITC remains upon the dealer
claiming such ITC. Such a burden of proof
cannot get shifted on the revenue. Mere
production of the invoices or the payment
made by cheques is not enough and cannot be
said to be discharging the burden of proof cast
under section 70 of the KVAT Act, 2003. The
dealer claiming ITC has to prove beyond
doubt the actual transaction which can be
proved by furnishing the name and address of
the selling dealer, details of the vehicle which
has delivered the goods, payment of freight
charges, acknowledgement of taking delivery
of goods, tax invoices and payment particulars
etc. The aforesaid information would be in
addition to tax invoices, particulars of
payment etc. In fact, if a dealer claims Input
Tax
Credit
on
purchases,
such
dealer/purchaser shall have to prove and
establish the actual physical movement of
goods,
genuineness
of
transactions
by
furnishing the details referred above and mere
production of tax invoices would not be
sufficient to claim ITC. In fact, the genuineness
of the transaction has to be proved as the
burden to prove the genuineness of transaction
as per section 70 of the KVAT Act, 2003 would
be upon the purchasing dealer. At the cost of
repetition, it is observed and held that mere
production of the invoices and/or payment by
cheque is not sufficient and cannot be said to
be proving the burden as per section 70 of the
Act, 2003.

11. Further, this Court in M/s Malik
Traders (supra) has held as under:-

17. Patna High Court in the case
of M/s Astha Enterprises (supra) has held
as under :-

"9. .... It was held that the dealer
who claims Input Tax Credit has to prove
beyond doubt, the actual transaction by
furnishing the name and address of selling
dealer, details of the vehicle delivering the
goods,
payment
of
freight
charges,
acknowledgement of taking delivery of
goods,
tax
invoices
and
payment
particulars etc. It was also held that to
sustain a claim of Input Tax Credit on
purchases, the purchasing dealer would
have to prove and establish the actual
physical movement of the goods and
genuineness of transactions, by furnishing
the details referred to above and mere
production of tax invoices would not be
sufficient to claim ITC."

18. Similarly, this Court in the
case of the Commissioner Commercial Tax
Vs. M/s Ramway Foods Ltd. (supra) has
held that the primary responsibility of
claiming the benefit is upon the dealer to
prove and establish the actual physical
movement
of
goods,
genuineness
of
transactions, etc. and if the dealer fails to
prove the actual physical movement of
goods, the benefit cannot be granted.

19. The judgement relied upon by
the counsel for the petitioner of Calcutta
High Court in the cases of M/s LGW
Industries Limited and others (supra) and
Sanchita Kundu and another (supra) is of
no aid to the petitioner as recently Hon'ble
the Apex Court in the case of M/s Ecom
Gill Coffee Trading Private Limited (supra)
has specifically held that onus is to be
discharged by the petitioner to prove and
establish
beyond
doubt
the
actual
transaction and physical movement of
goods. But in the case in hand, the
petitioner has failed to prove and establish
actual physical movement of goods and
262 INDIAN LAW REPORTS ALLAHABAD SERIES
genuineness of transaction as such the
proceedings has rightly been initiated.

20. Further, the case law relied
upon by the counsel for the petitioner of
this Court in Ashish Trading Company
(supra) is also of no aid to the petitioner as
in that case in para 14, the Court has
recorded a finding of fact that order of the
first appellate authority is cryptic as no
details were provided. But the facts of the
present case is different as stated in
previous paras and recent judgement of
Apex Court in the case of Ecom Gill Coffee
Tradiving Pvt. Ltd. (supra) is squarely
applicable in the facts of the present case.

21. In view of the facts as stated
above, no interference is called for by this
Court in the impugned orders. The writ
petition fails and is dismissed accordingly.

12. From the perusal of the
record shows that the petitioner failed to
discharge its onus to prove and establish
beyond doubt the actual transaction, actual
physical movement of goods as well as the
genuineness of the transactions and as
such, the proceedings have rightly been
initiated against the petitioner under
section 74 of the GST Act."

24. Hon'ble Apex Court in M/s Ecom
Gill Coffee Trading Private Limited
(supra) while dealing with provisions of
Section 70 of the Karnataka Value Added
Tax Act, 2003 had the occasion to consider
for passing the benefit of ITC and held as
under:-

"9.1 Thus, the provisions of
Section 70, quoted hereinabove, in its plain
terms clearly stipulate that the burden of
proving that the ITC claim is correct lies
upon the purchasing dealer claiming such
ITC. Burden of proof that the ITC claim is
correct is squarely upon the assessee who
has to discharge the said burden. Merely
because the dealer claiming such ITC
claims that he is a bona fide purchaser is
not enough and sufficient. The burden of
proving the correctness of ITC remains
upon the dealer claiming such ITC. Such a
burden of proof cannot get shifted on the
revenue. Mere production of the invoices or
the payment made by cheques is not enough
and cannot be said to be discharging the
burden of proof cast under section 70 of the
KVAT Act, 2003. The dealer claiming ITC
has to prove beyond doubt the actual
transaction which can be proved by
furnishing the name and address of the
selling dealer, details of the vehicle which
has delivered the goods, payment of freight
charges,
acknowledgement
of
taking
delivery of goods, tax invoices and payment
particulars etc. The aforesaid information
would be in addition to tax invoices,
particulars of payment etc. In fact, if a
dealer
claims
Input
Tax
Credit
on
purchases, such dealer/purchaser shall
have to prove and establish the actual
physical movement of goods, genuineness
of transactions by furnishing the details
referred above and mere production of tax
invoices would not be sufficient to claim
ITC. In fact, the genuineness of the
transaction has to be proved as the burden
to prove the genuineness of transaction as
per section 70 of the KVAT Act, 2003
would be upon the purchasing dealer. At
the cost of repetition, it is observed and
held that mere production of the invoices
and/or payment by cheque is not sufficient
and cannot be said to be proving the
burden as per section 70 of the Act, 2003."

25. Section 74 of the Act of 2017
provides
for
determination
of
tax
[pertaining to the period upto Financial
Year 2023-24] not paid or short paid or
erroneously refunded or input tax credit
wrongly availed or utilised by reason of
5 All. Trendships Online Services Private Ltd. Vs. Commissioner Commercial Tax U.P. at Lucknow & Anr.
263
fraud or any wilful misstatement or
suppression of fact. Relevant provision is
extracted hereasunder:-

"74.
Determination
of
tax
[,pertaining to the period upto Financial
Year 2023-24,] not paid or short paid or
erroneously refunded or input tax credit
wrongly availed or utilised by reason of
fraud or any wilful-misstatement or
suppression of facts.

(1) Where it appears to the
proper officer that any tax has not been
paid or short paid or erroneously refunded
or where input tax credit has been wrongly
availed or utilised by reason of fraud, or
any wilful-mis statement or suppression of
facts to evade tax, he shall serve notice on
the person chargeable with tax which has
not been so paid or which has been so short
paid or to whom the refund has erroneously
been made, or who has wrongly availed or
utilised input tax credit, requiring him to
show cause as to why he should not pay the
amount specified in the notice along with
interest payable thereon under section 50
and a penalty equivalent to the tax
specified in the notice.

(2) The proper officer shall issue
the notice under sub-section (1) at least six
months prior to the time limit specified in
sub-section (10) for issuance of order.

(3) Where a notice has been
issued for any period under sub-section (1),
the proper officer may serve a statement,
containing the details of tax not paid or
short paid or erroneously refunded or input
tax credit wrongly availed or utilised for
such periods other than those covered
under sub-section (1), on the person
chargeable with tax.

(4) The service of statement
under sub-section (3) shall be deemed to be
service of notice under sub-section (1) of
section 73, subject to the condition that the
grounds relied upon in the said statement,
except the ground of fraud, or any wilfulmisstatement or suppression of facts to
evade tax, for periods other than those
covered under sub-section (1) are the same
as are mentioned in the earlier notice.

(5) The person chargeable with
tax may, before service of notice under subsection (1), pay the amount of tax along
with interest payable under section 50 and
a penalty equivalent to fifteen per cent. of
such tax on the basis of his own
ascertainment of such tax or the tax as
ascertained by the proper officer and
inform the proper officer in writing of such
payment.

(6) The proper officer, on receipt
of such information, shall not serve any
notice under sub-section (1), in respect of
the tax so paid or any penalty payable
under the provisions of this Act or the rules
made thereunder.

(7) Where the proper officer is of
the opinion that the amount paid under
sub-section (5) falls short of the amount
actually payable, he shall proceed to issue
the notice as provided for in sub-section (1)
in respect of such amount which falls short
of the amount actually payable.

(8) Where any person chargeable
with tax under sub-section (1) pays the said
tax along with interest payable under
section 50 and a penalty equivalent to
twenty-five per cent. of such tax within
thirty days of issue of the notice, all
proceedings in respect of the said notice
shall be deemed to be concluded.

(9) The proper officer shall, after
considering the representation, if any,
made by the person chargeable with tax,
determine the amount of tax, interest and
penalty due from such person and issue an
order.

(10) The proper officer shall
issue the order under sub-section (9) within
264 INDIAN LAW REPORTS ALLAHABAD SERIES
a period of five years from the due date for
furnishing of annual return for the
financial year to which the tax not paid or
short paid or input tax credit wrongly
availed or utilised relates to or within five
years from the date of erroneous refund.

(11) Where any person served
with an order issued under sub-section (9)
pays the tax along with interest payable
thereon under section 50 and a penalty
equivalent to fifty per cent. of such tax
within thirty days of communication of the
order, all proceedings in respect of the said
notice shall be deemed to be concluded.

[(12) The provisions of this
section
shall
be
applicable
for
determination of tax pertaining to the
period upto Financial Year 2023-24.]

Explanation 1 : For the purposes
of section 73 and this section, -

(i)
the
expression
"all
proceedings in respect of the said notice"
shall not include proceedings under section
132;

(ii) where the notice under the
same proceedings is issued to the main
person liable to pay tax and some other
persons, and such proceedings against the
main person have been concluded under
section 73 or section 74, the proceedings
against all the persons liable to pay penalty
under [sections 122 and 125] are deemed
to be concluded.

[***]"

26. Thus, from the reading of Section
74, it is clear that where the authorities find
that any tax has not been paid or
erroneously refunded or input tax credit has
been wrongly availed or utilised by reason
or
fraud
or
wilful
misstatement,
proceedings are initiated.

27. In the instant case, notice under
Section 74(1) was issued by taxing
authorities
after
it
was
found
that
registration of the supplier Shree Radhey
International was cancelled and no tax was
deposited by him while ITC was claimed
on the alleged transaction between the
supplier and the purchaser.

28. The petitioner apart from the tax
invoice could not bring any document
before the taxing authorities in pursuance
to the show-cause notice to demonstrate
that supplier had supplied the goods and
had deposited the tax with the Government
as mandated under Section 16(2)(c).

29.
Proceedings
initiated
under
Section 74 has to be read in consonance
with Section 16(2) of the Act. The entire
scheme for the eligibility and condition for
input tax credit is provided under Section
16 by Legislature. However, various checks
and balances have been put and also the
procedure has been laid for the availment
of ITC which are under Section 41 and
previously omitted Section 43A. Section 74
is a mechanism where any input tax credit
which has wrongly been availed can be
taken back by Government along with
interest and penalty.

30. The scheme under the Act has
been
provided
to
prevent
fraudulent
transactions and bogus claims of ITC.
Safeguards have been put in place through
various provisions to match transactions
which have taken place between the parties
before ITC is availed. Despite these
safeguards in place, there are cases where
the ITC is fraudulently obtained by
misstatement or suppression of facts.

31. This is one of the case where
registration of supplier firm was cancelled
and on inquiry, it was found that no tax was
deposited by supplier with the Government
5 All. M/s Saini Zarda Store Vs. State of U.P. & Ors.
265
as was required under sub-section (2)(c) of
Section
16
before
ITC
is
claimed.
Petitioner could not demonstrate before the
taxing authorities or before this Court that
tax was in fact deposited by supplier
pursuant to issuance of tax invoice.

32. Reliance place upon the various
judgments by petitioner's counsel does not
help her case as no consideration of
mandatory provision of Section 16(2)(c) of
the Act has been considered. Moreover, in
many of the cases placed before the Court,
the matter has been remanded back to
authorities for consideration afresh. In
Rimjhim Ispat Ltd. (supra), the showcause notice issued to petitioner therein
was only stayed though challenge is to the
vires of Section 16(2)(c) which still holds
the field.

33. Finding of fact has been recorded
by both taxing authorities which needs no
interference of this Court.

34.
Considering
the
facts
and
circumstances of the case, I find that no
interference is required in the orders
impugned.

35. Writ petition fails and is hereby
dismissed.

36. Interim order, granted earlier,
stands discharged.
----------
(2025) 5 ILRA 265
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 01.05.2025

BEFORE

THE HON'BLE AJIT KUMAR, J.

Writ Tax No. 1828 of 2025
M/s Saini Zarda Store ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Sri Shubham Agrawal

Counsel for the Respondents:
C.S.C.

Petitioner, a proprietorship engaged in the
business of trading under the Goods and
Services Tax Act, 2017- order of assessing
officer - u/s 74 of the GST Act- absolutely ex
parte- neither alleged show cause notice was
ever brought to the knowledge -nor service was
physically ever effected upon petitioner- party
under liability of tax in an ex parte order needs
at-least an opportunity to put up his defenseorder passed by the assessing officer shall be
taken to be notice within the meaning of Section
74 of the GST Act, 2017 to enable the petitioner
to file his objection.

W.P. disposed. (E-9)

List of Cases cited:

1. Shyam Roshan Transport Vs St. of U.P. & ors.
-Writ Tax No. 1756 of 2024 decided on
21.10.2024

2. Atul Agrwal Vs St. of U.P. & ors. -Writ Tax No.
1585 of 2024 decided 18.10.2024

3. M/s Akriti Food Industry LLP Vs St. of U.P. &
ors., Writ Tax No. 2070 of 2024 decided on
3.12.2024

4. M/s Sai Dham Residency Vs St. of U.P. & anr.
in Writ Tax No.- 1175 of 2024 decided on 28th
August, 2024

(Delivered by Hon'ble Ajit Kumar, J.)

1. Heard learned counsel for the
petitioner and learned Standing Counsel.

2. Invoking extra ordinary jurisdiction
of this Court under Article 226 of the