THE STATE OF KARNATAKA versus M/S ECOM GILL COFFEE TRADING PRIVATE LIMITED

Citation: [2023] 2 S.C.R. 647 · Decided: 13-03-2023 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Appeal(s) allowed

Judgment (excerpt)

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[2023] 2 S.C.R. 647
647
THE STATE OF KARNATAKA
v.
M/S ECOM GILL COFFEE TRADING PRIVATE LIMITED
(Civil Appeal No. 230 of 2023)
MARCH 13, 2023
[M. R. SHAH AND C. T. RAVIKUMAR, JJ.]
Karnataka Value Added Tax Act, 2003 – s.70 Karnataka Value
Added Tax Rules, 2005 – rr. 27 and 29 – Burden of proof u/s. 70 –
Input Tax Credit – Claim of – Respondents (purchasing dealers)
claimed the Input Tax Credit (ITC) on the purchases made from the
respective dealers – Assessing Officer, doubted the genuineness of
the transactions and the purchases made from the respective dealers
and denied the ITC – Findings of Assessing Officer confirmed by
the first Appellate Authority – Second Appellate Authority and the
High Court have allowed the ITC, by observing that as the
purchasing dealers produced the invoices issued by the respective
dealers and that in some of the cases, they also made the payment
through cheques, the Assessing Officer was not justified in denying
the ITC – On appeal, held: The burden of proving that the ITC
claim is correct lies upon the purchasing dealer claiming such ITC
– For claiming ITC, genuineness of the transaction and actual
physical movement of the goods are the sine qua non – Mere
production of the invoices and/or payment by cheque is not sufficient
and cannot be said to be proving the burden as per s.70 –
Respondents failed to prove the genuineness of the transactions
and failed to discharge the burden of proof as per s. 70 – In absence
of any cogent material like 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. and the actual
physical movement of the goods by producing the cogent materials,
the Assessing Officer was absolutely justified in denying the ITC –
Merely because the tax invoice as per Rule 27 and Rule 29 might
have been produced, that by itself cannot be said to be proving the
actual physical movement of the goods – Judgments passed by the
High Court and the second Appellate Authority allowing the ITC
quashed and set aside – The orders passed by the Assessing Officer,
confirmed by the first Appellate Authority are restored.
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SUPREME COURT REPORTS
[2023] 2 S.C.R.
Allowing the appeals, the Court
HELD: 1. The provisions of Section 70, 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 Karnataka Value Added Tax 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. If the purchasing dealer/s fails/fail to
establish and prove the said important aspect of physical
movement of the goods alleged to have been purchased by it/
them from the concerned dealers and on which the ITC have
been claimed, the Assessing Officer is absolutely

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