2023/DHC/001766

IN THE HIGH COURT OF DELHI AT NEW DELHI

% Judgment delivered on: 10.03.2023

+ W.P.(C) 10407/2022
M/S BALAJI EXIM ..... Petitioner
Versus
COMMISSIONER, CGST AND ORS. ….. Respondents
AND
+ W.P.(C) 10423/2022

M/S BALAJI EXIM ..... Petitioner

Versus
COMMISSIONER, CGST AND ORS. ….. Respondents

Advocates who appeared in this case:

For the Petitioner : Mr. Abhas Mishra, Ms. Aakriti P. Mishra
and Mr. Shyam Bhageria, Advs

For the Respondents : Mr. Aditya Singla, Senior Standing Counsel

with Ms. A. Sahitya Veena, Adv. for R- 1
and 2.
Ms. Nidhi Banga, Senior Panel Counsel, UOI
with Mr. Nishant Kumar, Adv. for R-3.
CORAM
HON’BLE MR JUSTICE VIBHU BAKHRU
HON'BLE MR. JUSTICE AMIT MAHAJAN

JUDGMENT

VIBHU BAKHRU, J

1. The petitioner has filed the present petitions impugning the

common Order-In-Appeal dated 31.03.2022 (Order-In-Appeal No.347-

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348/2021-22 – hereafter ‘the impugned order’), whereby two separate

appeals preferred by the petitioner against the Order-In-Original Nos.
ZU0707210034420 dated 03.07.2021 and ZT0707210034442 dated
02.07.2021, respectively were dismissed.

2. Although the petitioner has a statutory right to appeal the

impugned order, it is not possible for the petitioner to avail the said
remedy as the Tribunal has not been constituted.

3. The petitioner had filed its refund application dated 11.09.2020

(in Form – GST-RFD – 01) seeking refund of the unutilized Input Tax
Credit (hereafter ‘ITC’) amounting to ₹72,03,961/-, which comprised
of Integrated Goods and Service Tax (hereafter ‘IGST’) amounting to
₹19,53,062/- and Cess of ₹52,50,899/-. The petitioner also filed another
refund application dated 12.09.2020 (in Form GST-RFD – 01) claiming
refund of ITC of ₹12,40,270/- comprising of IGST of ₹3,37,174/- and
Cess amounting to ₹9,03,096/-. The refund sought was in respect of
goods exported by the petitioner.

4. Respondent no.2 issued an acknowledgment (in Form GST-

RFD-02) dated 27.09.2020, in respect of the petitioner’s refund
application for the amount of ₹12,40,270/-. In respect of the first
application dated 11.09.2020, respondent no.2 issued a deficiency
memo dated 21.09.2020, inter alia, stating that the supporting
documents were not uploaded on the GST portal. Accordingly, the
petitioner filed another application dated 23.09.2020 along with all
documents in support of its refund application. The same was

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acknowledged by the respondent on 01.10.2020.

5. The petitioner’s applications were not processed as the supplier

from whom the petitioner had purchased the goods had allegedly
received fake invoices from its suppliers.

6. A search was conducted by the officers of Central GST, Anti

Evasion Branch, Delhi West Commissionerate in the premises of the
petitioner on 21.10.2020. Thereafter, the petitioner (its proprietor) was
summoned to the office of respondent no.1 on 23.10.2020 to tender
certain documents.

7. Admittedly, the petitioner (proprietor) appeared before the

Superintendent, Anti Evasion Branch on 23.10.2020 and furnished
documents as sought for. Notwithstanding the same, the petitioner was
issued another summons dated 28.12.2020 for furnishing the
documents, which, according to the petitioner, had already been
submitted.

8. The petitioner wrote several letters to respondent no.2 requesting

for an early disposal of his refund applications. However, his requests
were not acceded to.

9. In the meantime, the petitioner became aware of the allegations

that its supplier, M/s Shruti Exports, had issued fake invoices and its
ITC was blocked. The said supplier had moved the High Court of
Calcutta by filing a writ petition seeking unblocking of its Electronic
Credit Ledger (hereafter ‘ECL’).

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10. Show cause notice dated 04.06.2021 was issued by respondent

no.2 to the petitioner proposing to reject the petitioner’s refund
applications. This show cause notice indicated that respondent no.2 had
sought a report regarding legitimacy and genuineness of the export of
goods from the Customs Station, Kolkata, which were purchased by the
petitioner from M/s Shruti Exports (proprietor Sh. Vijander Kumar
Goel). In response to the said query, respondent no.2 had received
information that the said supplier – M/s Shruti Exports was being
investigated by DGGI in connection with fake invoices allegedly issued
by it. It was further alleged that M/s Shruti Exports had availed CGST
and SGST amounting to ₹1,35,21,489/- and Cess of ₹21,76,132/- on the
strength of fake invoices issued by certain persons.

11. The petitioner responded to the said show cause notice on

12.06.2021. The petitioner was also afforded a personal hearing by
respondent no.2 on 01.07.2021. During the course of the said
proceedings, the petitioner also submitted additional documents in
support of its refund claim.

12. The petitioner submitted that he was not concerned with any
allegation against its supplier M/s Shruti Exports (proprietor Vijander
Kumar Goel) as the purchases made by it were genuine and against
genuine invoices. He also pointed out that in WPA No.4006/2020
captioned Vijander Kumar Goel v. Assistant Commissioner, CGST
Central Tax & Anr., the Calcutta High Court had passed an order
directing unblocking of the ITC of the petitioner therein (Vijander
Kumar Goel) and the same was subsequently unblocked.

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13. Respondent no.2 rejected the refund applications by an order

dated 02.07.2021, essentially, on the same grounds as stated in the show
cause notice. Respondent no.2 reiterated that an investigation had been
initiated against the supplier (M/s Shruti Exports) from where the
petitioner had allegedly procured the goods. The said order indicated
that respondent no.2 had received information that M/s Shruti Exports
(GST No. 19AFRPG5814N1ZS) had issued the following two invoices
to the petitioner in the month of August, 2020:

(i) Invoice No. SE/32/20.21 dated 29.08.2020; and

(ii) Invoice No. SE/33/20.21 dated 29.08.2020

14. Although it was confirmed that the said invoices were reflected
on the ‘AIO’ System, the refund applications were rejected for the
reason that “it appeared that they are to be part of a supply chain
involving fake Input Tax Credit”.

15. The petitioner appealed the said orders rejecting its refund
applications, which was dismissed by the impugned order.

16. The Appellate Authority held that although the petitioner was in
possession of the tax invoices, it could not be said that the petitioner
had received the goods. Therefore, one of the conditions as stipulated
in Section 16(2) of the Central Goods & Services Tax, 2017 – the
taxpayer has received the goods or services or both – was not satisfied.
The Appellate Authority concluded that the present case was one of
“goodless supply on the strength of fake invoices”.

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17. It is clear from the above that the petitioner’s refund applications
were rejected on a mere apprehension that its supplier had issued fake
invoices. There is no conclusive finding on the basis of any cogent
material that the invoices issued by M/s Shruti Exports to the petitioner
are fake invoices.

18. Admittedly, the invoices issued by M/s Shruti Exports are

reflected in the AIO System and there is no dispute that M/s Shruti
Exports had issued the said invoices. It is also clear that M/s Shruti
Exports is a dealer registered with the Goods & Services Tax
Department. There is no allegation that the invoices (which include
IGST as well as Cess) were not paid by the petitioner. It is also
important to note that there is no allegation that the goods in question
were not exported overseas. Thus, the petitioner has established not
only the fact that the goods have been exported but that it had paid for
the same including the IGST and Cess.

19. The respondents filed a counter affidavit enclosing therewith a

letter dated 16.04.2021 issued by the CGST Authorities, Kolkata in
response to the request of respondent no.2 verifying the existence and
genuineness of suppliers. The said letter indicates that M/s Shruti
Exports was found to be an existing dealer and its sole proprietor was
also a Director of M/s BVN Alloys Pvt. Ltd. Both the dealers were
found existing at Room No.464, 4th Floor, 138 Biplabi Rashbehari Basu
Road, Kolkata-700001. It was found that M/s Shruti Exports had
availed of CGST and SGST totaling ₹1,35,21,489/- and Cess amounting
to ₹21,76,132/- from the taxpayers against whom cases were booked for

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issuing fake invoices. The said letter set out a tabular statement
mentioning the names of six dealers who had allegedly issued fake
invoices to M/s Shruti Exports. It was pointed out by the learned
counsel appearing for the petitioner that none of the said suppliers,
except one, PSSM Commercial Pvt. Ltd., had made any supplies
chargeable to Cess. He submitted that, thus, the only invoice in respect
of which supplies received by M/s Shruti Exports, which could be
assumed to be further supplied to the petitioner, was from PSSM
Commercial Pvt. Ltd. However, CGST and SGST paid by PSSM
Commercial Pvt. Ltd. was only ₹9,52,220/-.

20. It is also important to note that the supplies, as mentioned in the

said letter, were for a period prior to August, 2020.

21. Mr. Singla, learned counsel appearing for the petitioner, handed
over a copy of the show cause-cum-demand notice dated 30.11.2022
issued to M/s Shruti Exports and one, Sanjay Kumar Bhuwalka.
However, the said show cause notice indicates that it relates to the
period from July, 2017 to Financial Year 2019-20. Thus, it could not
possibly cover the supplies made to the petitioner.

22. It is apparent that the petitioner’s refund applications have been

rejected merely because of suspicion without any cogent material.
There is no dispute that goods have been exported; the invoices in
respect of which the petitioner claims the ITC were raised by a
registered dealer; and, there is no allegation that the petitioner has not
paid the invoices, which include taxes. Thus, the applications for refund

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cannot be denied.

23. There is merit in the petitioner’s contention that it is not required

to examine the affairs of its supplying dealers. The allegations of any
fake credit availed by M/s Shruti Exports cannot be a ground for
rejecting the petitioner’s refund applications unless it is established that
the petitioner has not received the goods or paid for them. In the present
case, there is little material to support any such allegations.

24. In On Quest Merchandising India Pvt. Ltd. v. Government of

NCT of Delhi & Ors.: 2017 SCC OnLine Del 11286, a Coordinate
Bench of this Court had referred to various authorities and observed as
under:

“39. Applying the law explained in the above decisions, it can

be safely concluded in the present case that there is a singular
failure by the legislature to make a distinction between purchasing
dealers who have bona fide transacted with the selling dealer by
taking all precautions as required by the DVAT Act and those that
have not. Therefore, there was need to restrict the denial of ITC
only to the selling dealers who had failed to deposit the tax
collected by them and not punish bona fide purchasing dealers. The
latter cannot be expected to do the impossible. It is trite that a law
that is not capable of honest compliance will fail in achieving its
objective. If it seeks to visit disobedience with disproportionate
consequences to a bona fide purchasing dealer, it will become
vulnerable to invalidation on the touchstone of Article 14 of the
Constitution.

40. *** *** ***

41. The Court respectfully concurs with the above analysis and
holds that in the present case, the purchasing dealer is being asked
to do the impossible, i.e. to anticipate the selling dealer who will
not deposit with the Government the tax collected by him from
those purchasing dealer and therefore avoid transacting with such
selling dealers. Alternatively, what Section 9(2)(g) of the DVAT

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Act requires the purchasing dealer to do is that after transacting

with the selling dealer, somehow ensure that the selling dealer does
in fact deposit the tax collected from the purchasing dealer and if
the selling dealer fails to do so, undergo the risk of being denied
the ITC. Indeed Section 9(2)(g) of the DVAT Act places an
onerous burden on a bonafide purchasing dealer.”

25. In view of the above, the petitioner would be entitled to the

refund of the ITC on goods that have been exported by it. The present
petitions are, accordingly, allowed and the respondents are directed to
forthwith process the petitioner’s applications for refund of the ITC
including Cess.

26. It is clarified that in the event the respondents are able to find
material to establish the allegations regarding non-supply of any goods
by M/s Shruti Exports to the petitioner, it would be open for the
respondents to initiate such action as may be warranted in accordance
with law.

VIBHU BAKHRU, J

AMIT MAHAJAN, J
MARCH 10, 2023
‘gsr’

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