In W.P. No.6780 of 2020 -MADR HC- No Input Tax Credit for supply of goods or services if tax not paid to government: Madras High Court
Justice C. Saravanan [03-07-2023]

Read Order: M/s. Jai Balaji Paper Cones v. The Assistant Commissioner, Sales Tax, Tiruchengode & Ors.

Chahat Varma

New Delhi, August 9, 2023:  The Madras High Court has dismissed the writ petition filed by M/s. Jai Balaji Paper Cones (petitioner), ruling that as per Section 16(2)(c) of the Central Goods and Service Tax Act, a registered person is not entitled to claim input tax credit for any supply of goods or services if the tax has not been paid to the government.

The case involved the petitioner's purchase of goods from Raghava Industries through three invoices dated 23.11.2018, where an amount of Rs. 4,14,000, inclusive of GST, was paid to the supplier. However, it was discovered that Raghava Industries' GST registration was cancelled on 31.10.2018, before the mentioned invoices were issued. The petitioner contended that since they had already paid the tax amount to Raghava Industries, they should not be required to pay IGST.

The single-judge bench of Justice C. Saravanan observed that the registration of Raghava Industries was cancelled on 31.10.2018, which was before the three invoices dated 23.11.2018 were raised. This cancellation indicated that Raghava Industries could not have paid the tax amount to the government for the mentioned invoices.

The bench held that due to the circumstances surrounding the cancellation of Raghava Industries' GST registration, there cannot be a mandamus to the Assistant Commissioner, Sales Tax, to grant the petitioner input tax credit or exemption from paying IGST. The bench emphasized that such relief would be contrary to the provisions of the GST Act of 2017 and the Rules made under it. Consequently, the bench found no merits in the present writ petition.

However, the bench clarified that the petitioner was entitled to recover the amount they paid to Raghava Industries in some other manner permitted by the law.