THE STATE OF KARNATAKA versus M/S ECOM GILL COFFEE TRADING PRIVATE LIMITED on 13 March 2023

[2023] 2 S.C.R. 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 ValueAdded 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 therespective dealers – Assessing Officer, doubted the genuineness ofthe transactions and the purchases made from the respective dealersand denied the ITC – Findings of Assessing Officer confirmed bythe first Appellate Authority – Second Appellate Authority and theHigh Court have allowed the ITC, by observing that as thepurchasing dealers produced the invoices issued by the respectivedealers and that in some of the cases, they also made the paymentthrough cheques, the Assessing Officer was not justified in denyingthe ITC – On appeal, held: The burden of proving that the ITCclaim is correct lies upon the purchasing dealer claiming such ITC– For claiming ITC, genuineness of the transaction and actualphysical movement of the goods are the sine qua non – Mereproduction of the invoices and/or payment by cheque is not sufficientand cannot be said to be proving the burden as per s.70 –Respondents failed to prove the genuineness of the transactionsand failed to discharge the burden of proof as per s. 70 – In absenceof any cogent material like furnishing the name and address of theselling dealer, details of the vehicle which has delivered the goods,payment of freight charges, acknowledgement of taking delivery ofgoods, tax invoices and payment particulars etc. and the actualphysical 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 mighthave been produced, that by itself cannot be said to be proving theactual physical movement of the goods – Judgments passed by theHigh Court and the second Appellate Authority allowing the ITCquashed and set aside – The orders passed by the Assessing Officer,confirmed by the first Appellate Authority are restored.

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648SUPREME COURT REPORTS

AAllowing the appeals, the Court

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648SUPREME COURT REPORTS

AAllowing the appeals, the Court

HELD: 1. The provisions of Section 70, in its plain termsclearly stipulate that the burden of proving that the ITC claim iscorrect lies upon the purchasing dealer claiming such ITC.Burden of proof that the ITC claim is correct is squarely uponBthe assessee who has to discharge the said burden. Merelybecause the dealer claiming such ITC claims that he is a bona fidepurchaser is not enough and sufficient. The burden of proving thecorrectness of ITC remains upon the dealer claiming such ITC.Such a burden of proof cannot get shifted on the revenue. Mereproduction of the invoices or the payment made by cheques is notCenough and cannot be said to be discharging the burden of proofcast under section 70 of the Karnataka Value Added Tax Act, 2003.The dealer claiming ITC has to prove beyond doubt the actualtransaction which can be proved by furnishing the name and addressof the selling dealer, details of the vehicle which has delivered theDgoods, payment of freight charges, acknowledgement of takingdelivery of goods, tax invoices and payment particulars etc. Theaforesaid information would be in addition to tax invoices,particulars of payment etc. In fact, if a dealer claims Input TaxCredit on purchases, such dealer/purchaser shall have to proveand establish the actual physical movement of goods, genuinenessEof transactions by furnishing the details referred above and mereproduction of tax invoices would not be sufficient to claim ITC.In fact, the genuineness of the transaction has to be proved asthe burden to prove the genuineness of transaction as per section70 of the KVAT Act, 2003 would be upon the purchasing dealer.FAt the cost of repetition, it is observed and held that mereproduction of the invoices and/or payment by cheque is notsufficient and cannot be said to be proving the burden as persection 70 of the Act, 2003. If the purchasing dealer/s fails/fail toestablish and prove the said important aspect of physicalmovement of the goods alleged to have been purchased by it/Gthem from the concerned dealers and on which the ITC havebeen claimed, the Assessing Officer is absolutely justified inrejecting such ITC claim. [Paras 9.1, 10][656-F-H; 657-A-C, G]

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2. Now so far as the reliance placed upon Rules 27 and 29of the Karnataka Value Added Tax Rules, 2005 and thesubmission on behalf of the purchasing dealers that under theprovisions of the Rules 2005, more particularly under Rules 27& 29, the only requirement is to issue the tax invoice and toproduce the same and there is no other requirement is concerned,the aforesaid has no substance. Rule 27 cast an obligation on thedealers to issue tax invoice and the particulars of the tax invoiceare provided under Rule 29. Merely because the tax invoice asper Rule 27 and Rule 29 might have been produced, that by itselfcannot be said to be proving the actual physical movement of thegoods, which is required to be proved. [Para 13][658-G-H; 659-A]

3. In absence of any further cogent material like furnishingthe name and address of the selling dealer, details of the vehiclewhich has delivered the goods, payment of freight charges,acknowledgement of taking delivery of goods, tax invoices andpayment particulars etc. and the actual physical movement of thegoods by producing the cogent materials, the Assessing Officerwas absolutely justified in denying the ITC, which was confirmedby the first Appellate Authority. Both, the second AppellateAuthority as well as the High Court have materially erred inallowing the ITC despite the concerned purchasing dealers failedto prove the genuineness of the transactions and failed todischarge the burden of proof as per section 70 of the KVAT Act,2003. The impugned judgment(s) and order(s) passed by the HighCourt and the second Appellate Authority allowing the ITC areunsustainable and deserve to be quashed and set aside and arehereby quashed and set aside. The orders passed by theAssessing Officer denying the ITC to the concerned purchasingdealers, confirmed by the first Appellate Authority are herebyrestored. [Para 15][659-F-H; 660-A-B]

M/s. Bhagadia Brothers Vs. Additional Commissionerof Commercial Taxes STA No. 4 of 2018 dated29.01.2020; Madhav Steel Corporation Vs. State ofGujarat Tax Appeal No. 742 of 2013; Shreeji ImpexVs. State of Gujarat Tax Appeal No. 330 of 2014, 2014SCC OnLine Guj 8074; Corporation Bank Vs.

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ASaraswati Abharansala (2009) 19 VST 84 (SC); TheAdditional Commissioner of commercial Taxes Zone –II and Ors. Vs. M/s. Transworld Star Manjushree CivilAppeal Nos. 216-217 of 2023 @ SLP (Civil) No. 6337-6338 of 2022; On Quest Merchandising India Pvt. Ltd.v. Government of NCT of Delhi (Writ Petition (Civil)BNo. 6093/2017, decided on 26.10.2017 – referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 230 of2023.

From the Judgment and Order dated 26.05.2021 of the High CourtCof Karnataka at Bengaluru in STRP No. 18 of 2017.

With

Civil Appeal Nos. 231, 232 and 216-217 of 2023.

Nikhil Goel, AAG, Shubhranshu Padhi, Vishal Bansal, Ms.DRajeshwari Shankar, Niroop Sukrithy, Mohd. Ovais, Adithya Koshy Roy,Advs. for the Appellant.

Swarnendu Chatterjee, Ms. Deepakshi Garg, Yashwardhan Singh,Ms. Megha Saha, Pai Amit, Thirumalesh M., Ms. Pankhuri Bhardwaj,Rahat Bansal, Abhiyudaya Vats, Ms. Sonali Suryawanshi, RaghavendraS. Srivatsa, Amit Pai, Venkita Subramoniom T.R., Likhi Chand Bhonsle,EMs. Komal Mundhra, K.J. Kamath, Bhargava V. Desai, Mrs. VeenaKamath, Ms. Lekha Dhilip, Rahul Gupta, Ms. Ankita Chopra, Advs. forthe Respondent.

The Judgment of the Court was delivered by FM. R. SHAH, J.

1. As common question of law and facts arise in this group ofappeals and the issue is with respect to interpretation of Section 70 ofthe Karnataka Value Added Tax Act, 2003 (hereinafter referred to asthe ‘KVAT Act, 2003’), all these appeals are decided and disposed ofGtogether, by this common judgment and order.

2. For the sake of convenience, Civil Appeal No. 231 of 2023arising from the impugned judgment and order dated 26.02.2021 passedby the High Court of Karnataka at Bengaluru in S.T.R.P. No. 82 of 2018is treated as the lead matter, as in some matters, the said decision hasHbeen relied upon.

3. By the impugned judgment(s) and order(s) passed by the HighCourt, the High Court has dismissed the revision applications preferredby the revenue – State of Karnataka and as such has allowed the InputTax Credit (hereinafter referred to as the ‘ITC’) claimed by the respectivepurchasing dealers. The impugned judgment(s) and order(s) passed bythe High Court are the subject matter of present appeals.

Civil Appeal No. 231/2023 (The State of Karnataka v. M/s Tallam Apparels)

4. The facts leading to the present appeal in nutshell are as under:

That the respondent herein – M/s Tallam Apparels (hereinafterreferred to as the ‘purchasing dealer’) purchased readymade garmentsfrom other dealers for the purposes of further sale. The purchasing dealerclaimed the ITC on such sale to the extent of Rs. 4,18,818/-. Vide orderdated 26.12.2014, the Assessing Officer disallowed the ITC claim forthe Assessment Year 2012-2013 on the ground that the dealers fromwhom M/s Tallam Apparels have purchased the readymade garmentshave either got their registration cancelled or have filed ‘NIL’ returns.Thus, the Assessing Officer doubted the sale and the payment of tax onsuch sale of which the ITC was claimed. An Appeal was filed by thepurchasing dealer. The Appellate Authority dismissed the same by holdingthat the burden under section 70 of the KVAT Act, 2003 has not beendischarged. However, the Karnataka Appellate Tribunal reversed theorders passed by the Assessing Officer as well as the first AppellateAuthority on the ground that the purchasing dealer should not suffer dueto default of seller. The revision application before the High Court hasbeen dismissed by the impugned judgment and order.

4.1. In other cases, the Tribunal as well as the High Court haveallowed the ITC in favour of the purchasing dealers solely/mainly on theground that the sale price was paid to the seller by an account payeecheque and that copies of invoices were produced.

4.2 Insofar as the case of M/s Ecom Gill Coffee Trading PrivateLimited being Civil Appeal No. 230 of 2023 is concerned, M/s Ecom –purchasing dealer purchased green coffee bean from other dealers forthe purposes of further sale in exports and in domestic market. Uponfinding some irregularities in Input Tax Rebate claimed by the purchasingdealer for Assessment Year 2010-2011, the Assessing Officer issuednotice under section 39 of the KVAT Act, 2003 seeking furnishing of A

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Aaccounts, books, tax invoices etc. Re-assessment order came to bepassed. It was found that the purchasing dealer had claimed ITC frommainly 27 sellers and out of aforesaid 27 sellers , six were found to bede-registered; three had effected sales to the respondent but did not filetaxes and six have outrightly denied turnover nor paid taxes. Therefore,ITC came to be disallowed to the extent of Rs. 10.52 lacs. The firstBAppellate Authority confirmed the findings of the Assessing Officer.However, the Tribunal allowed the second appeal on the ground that thepurchasing dealer purchased the coffee from the registered dealer undergenuine tax invoices and consequently allowed the ITC claimed. Therevision application before the High Court has been dismissed, relyingCupon its earlier decision in the case of M/s Tallam Apparels (supra).

5. Shri Nikhil Goel, learned AAG has appeared on behalf of theState of Karnataka and the respective learned counsel have appearedon behalf of the respective purchasing dealers.

6. Shri Nikhil Goel, learned AAG appearing on behalf of the StateDhas vehemently submitted that in the facts and circumstances of thecase, the High Court has materially erred in dismissing the revisionapplications and confirming the respective orders passed by the AppellateAuthorities in allowing the Input Tax Credit in favour of the respectivepurchasing dealers.E

6.1 It is vehemently submitted that the High Court has not properlyappreciated that when the Assessing Officer doubted the genuinenessof the transactions/sales and when it was found that the sale transactionswere only paper transactions and even in some of the cases, theregistration of the sellers were cancelled and nothing was on record thatFany tax was paid by the seller, the purchasing dealers shall not be entitledto the Input Tax Credit.

6.2 It is vehemently submitted by Shri Nikhil Goel, learned AAGappearing on behalf of the State that the High Court ought to haveappreciated that as such a duty is cast upon the purchasing dealers toGprove the transactions/financial transfers, which in the present case, thepurchasing dealers failed to discharge. It is submitted that for the purposesof Section 70 of the KVAT Act, 2003, the burden required to be dischargedis slightly higher than showing financial transfers and should show actualmovement of goods. It is submitted that mere production of invoices oreven payment to the seller by cheque cannot be said to be sufficient andH

may not be said to discharging the burden to claim Input Tax Credit, tobe discharged under Section 70 of the KVAT Act, 2003. It is submittedthat actual movement of goods is required to be established and proved,over and above the invoices, payment by cheques and actual paymentand even the demand of tax by the seller.

6.3 Shri Goel, learned AAG has heavily relied upon the decisionof the Karnataka High Court in the case of M/s. Bhagadia BrothersVs. Additional Commissioner of Commercial Taxes, STA No. 4of 2018 dated 29.01.2020, against which the special leave petition hasbeen dismissed as well as the decision of the Gujarat High Court in thecase of Madhav Steel Corporation Vs. State of Gujarat, Tax AppealNo. 742 of 2013 and other allied tax appeals against which also thespecial leave petition has been dismissed, however, keeping the questionof law open and has also relied upon another decision of the GujaratHigh Court in the case of Shreeji Impex Vs. State of Gujarat, TaxAppeal No. 330 of 2014, 2014 SCC OnLine Guj 8074, in supportof his above submissions.

6.4 It is further submitted by Shri Nikhil Goel, learned AAGappearing on behalf of the State that the High Court has failed toappreciate that the revenue cannot recover from the seller who is notregistered or who has filed ‘NIL’ returns, thereby denying sale. It isfurther submitted that the High Court has materially erred in observingand holding that once the purchases are made by the purchasing dealerby account payee cheque, the purchasing dealer is deemed to havedischarged his burden. It is submitted that the High Court has alsomaterially erred in observing that if the seller of the goods from whomthe dealer has purchased does not deposit such tax, the dealer (purchasingdealer) cannot be held liable for that. It is submitted that as such thepurchasing dealer is entitled to the Input Tax Credit on the tax paid bythe seller and/or on the tax paid. It is submitted that therefore, for thepurposes of Input Tax Credit, the purchasing dealer has to prove theactual payment of tax and actual transfer of goods and mere papertransaction is not sufficient.

6.5 Making above submissions and relying upon the abovedecisions, it is prayed to allow the present appeals.

7. While opposing the present appeals, learned counsel appearingon behalf of the respective assessees/dealers, who claimed the Input A

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ATax Credit have vehemently submitted that in the present case, as such,the purchasing dealers have discharged the burden of proof cast underSection 70 of the KVAT Act, 2003 and proved the genuineness of thetransactions by producing the genuine invoices and even the paymentmade through cheques. It is submitted that therefore once the dealerhas discharged the burden cast under Section 70 of the KVAT Act,2003,Bthe purchasing dealer is entitled to the Input Tax Credit and if at all it isfound that a tax is not paid by the seller, the same can be recovered fromthe seller. However, so far as the purchasing dealer is concerned, theyare entitled to the ITC, once having discharged the burden under Section70 of the KVAT Act, 2003.C

7.1 It is further submitted by learned counsel appearing on behalfof the respective dealers that in fact they have discharged the burden ofproof cast under Section 70 of the KVAT Act, 2003 by producing thevalid invoices and making the payment online to the supplier. It issubmitted that registration of the dealer and online payments were neverDdisputed. It is further submitted that apart from Section 70 of the KVATAct, 2003, the Karnataka Value Added Tax Rules, 2005, namely Rules27 and 29 provide for the details and obligations upon the dealer to issuethe tax invoice and also the particulars of the tax invoices. It is submittedthat neither the KVAT Act nor the Rules provide for any other documentor any other obligation, which are statutorily required for the purposes ofEestablishing the claim for seeking refund towards Input Tax Credit.

7.2 It is submitted that therefore the decision of the adjudicatingauthority was beyond the Act and Rules. It is further submitted by thelearned counsel appearing on behalf of the respective assessees / dealersthat the only requirement of law, as far as the purchasing dealers wantingFto avail the benefit of Input Tax Credit is concerned, is that he has tomake sure that the selling dealer is a registered dealer and has issuedthe tax invoice in compliance with the requirement of the KVAT Act andthe Rules made thereunder. It is submitted that once the purchasingdealer demonstrates that he has complied with such requirement, heGcannot be denied the ITC only because the selling dealer fails to dischargehis obligation under the KVAT Act.

7.3 It is submitted that in the present case, the respondents arepurchasing dealers, who have complied with the requirement of KVATAct and have ensured that the purchases made by them are inHcompliance with the requirements of the KVAT Act and Rules for claiming ITC. Reliance is placed on the decision of this Court in thecase of Corporation Bank Vs. Saraswati Abharansala, (2009) 19VST 84 (SC). It is further submitted that the ITC could be deniedwhere the purchasing dealer has acted without due diligence, i.e., byproceeding with the transaction without first ascertaining if the sellingdealer is a registered dealer having a valid registration. It is submittedthat denial of ITC to a purchasing dealer who has taken all the necessaryprecautions fails to distinguish such a diligent purchasing dealer fromthe one that has not acted bonafide. It is submitted that in the case ofThe Additional Commissioner of commercial Taxes Zone – IIand Ors. Vs. M/s. Transworld Star Manjushree, Civil AppealNos. 216-217 of 2023 @ SLP (Civil) No. 6337-6338 of 2022,both the seller and dealer were registered.

7.4 Making above submissions, it is prayed to dismiss the presentappeals.

8. We have heard learned counsel for the respective parties atlength.

We have gone through the orders passed by the Assessing Officerand the first Appellate Authority as well as the orders passed by thesecond Appellate Authority/Tribunal and also the impugned judgment(s)and order(s) passed by the High Court dismissing the revision applications.The respondents herein – all purchasing dealers claimed the Input TaxCredit on the alleged purchases made from the respective dealers. TheAssessing Officer, on appreciation of evidence and considering the othermaterial on record, doubted the genuineness of the transactions and thepurchases made from the respective dealers and denied the ITC. Thefindings of fact recorded by the Assessing Officer came to be confirmedby the first Appellate Authority. However, the second Appellate Authorityand the High Court have allowed the ITC, by observing that as thepurchasing dealers produced the invoices issued by the respective dealersand that in some of the cases they also made the payment through cheques,the Assessing Officer was not justified in denying the ITC. Against thegrant of ITC, the State is before this Court.

8.1 Therefore, the short question which is posed for theconsideration of this Court is, “whether, in the facts and circumstancesof the case, the second Appellate Authority as well as the High Courtwere justified in allowing the Input Tax Credit?”

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A9. While considering the aforesaid issue/question, Section 70 ofthe Karnataka Value Added Tax Act, 2003 is required to be referred to,which reads as under:

“70. Burden of proof.- (1) For the purposes of payment orassessment of tax or any claim to input tax under this Act, theBburden of proving that any transaction of a dealer is not liable totax, or any claim to deduction of input tax is correct, shall lie onsuch dealer.

(2) Where a dealer knowingly issues or produces a false tax invoice,credit or debit note, declaration, certificate or other document withCa view to support or make any claim that a transaction of sale orpurchase effected by him or any other dealer, is not liable to betaxed, or liable to tax at a lower rate, or that a deduction of inputtax is available, the prescribed authority shall, on detecting suchissue or production, direct the dealer issuing or producing suchdocument to pay as penalty:D

(a) in the case of first such detection, three times the tax duein respect of such transaction or claim; and (b) in the case of second or subsequent detection, five timesthe tax due in respect of such transaction or claim.

E(3) Before issuing any direction for the payment of the penaltyunder this Section, the prescribed authority shall give to the dealerthe opportunity of showing cause in writing against the impositionof such penalty.”

9.1 Thus, the provisions of Section 70, quoted hereinabove, in itsFplain terms clearly stipulate that the burden of proving that the ITC claimis correct lies upon the purchasing dealer claiming such ITC. Burden ofproof that the ITC claim is correct is squarely upon the assessee whohas to discharge the said burden. Merely because the dealer claimingsuch ITC claims that he is a bona fide purchaser is not enough andsufficient. The burden of proving the correctness of ITC remains uponGthe dealer claiming such ITC. Such a burden of proof cannot get shiftedon the revenue. Mere production of the invoices or the payment madeby cheques is not enough and cannot be said to be discharging the burdenof proof cast under section 70 of the KVAT Act, 2003. The dealer claimingITC has to prove beyond doubt the actual transaction which can beHproved 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 paymentparticulars etc. The aforesaid information would be in addition to taxinvoices, particulars of payment etc. In fact, if a dealer claims Input TaxCredit on purchases, such dealer/purchaser shall have to prove andestablish the actual physical movement of goods, genuineness oftransactions by furnishing the details referred above and mere productionof tax invoices would not be sufficient to claim ITC. In fact, thegenuineness of the transaction has to be proved as the burden to provethe genuineness of transaction as per section 70 of the KVAT Act, 2003would be upon the purchasing dealer. At the cost of repetition, it is observedand held that mere production of the invoices and/or payment by chequeis not sufficient and cannot be said to be proving the burden as persection 70 of the Act, 2003.

10. Even considering the intent of section 70 of the Act, 2003, itcan be seen that the ITC can be claimed only on the genuine transactionsof the sale and purchase and even as per section 70(2) if a dealerknowingly issues or produces a false tax invoice, credit or debit note,declaration, certificate or other document with a view to support or makeany claim that a transaction of sale or purchase effected by him or anyother dealer, is not liable to be taxed, or liable to take at a lower rate, orthat a deduction of input tax is available, such a dealer is liable to pay thepenalty. Therefore, as observed hereinabove, for claiming ITC,genuineness of the transaction and actual physical movement of thegoods are the sine qua non and the aforesaid can be proved only byfurnishing the name and address of the selling dealer, details of the vehiclewhich has delivered the goods, payment of freight charges,acknowledgement of taking delivery of goods, tax invoices and paymentparticulars etc. The purchasing dealers have to prove the actual physicalmovement of the goods, alleged to have been purchased from therespective dealers. If the purchasing dealer/s fails/fail to establish andprove the said important aspect of physical movement of the goods allegedto have been purchased by it/them from the concerned dealers and onwhich the ITC have been claimed, the Assessing Officer is absolutelyjustified in rejecting such ITC claim.

11. In the present case, the respective purchasing dealer/s has/have produced either the invoices or payment by cheques to claim ITC.The Assessing Officer has doubted the genuineness of the transactions AB

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Aby giving cogent reasons on the basis of the evidence and material onrecord. In some of the cases, the registration of the selling dealers havebeen cancelled or even the sale by the concerned dealers has beendisputed and/or denied by the concerned dealer. In none of the cases,the concerned purchasing dealers have produced any further supportingmaterial, such as, furnishing the name and address of the selling dealer,Bdetails of the vehicle which has delivered the goods, payment of freightcharges, acknowledgement of taking delivery of goods, tax invoices andpayment particulars etc. and therefore it can be said that the concernedpurchasing dealers failed to discharge the burden cast upon them underSection 70 of the KVAT Act, 2003. At the cost of repetition, it is observedCand held that unless and until the purchasing dealer discharges the burdencast under Section 70 of the KVAT Act, 2003 and proves the genuinenessof the transaction/purchase and sale by producing the aforesaid materials,such purchasing dealer shall not be entitled to Input Tax Credit.

12. Despite the findings of fact recorded by the Assessing OfficerDon the genuineness of the transactions, while refusing to allow the ITC,which came to be confirmed by the first Appellate Authority, the secondAppellate Authority as well as the High Court have upset the concurrentfindings given by the Assessing Officer as well as the first AppellateAuthority, on irrelevant considerations that producing invoices or paymentsthrough cheques are sufficient to claim ITC which, as observedEhereinabove, is erroneous. As observed hereinabove, over and abovethe invoices and the particulars of payment, the purchasing dealer has toproduce further material like the name and address of the selling dealer,details of the vehicle which has delivered the goods, payment of freightcharges, acknowledgement of taking delivery of goods including actualFphysical movement of the goods, alleged to have been purchased fromthe concerned dealers.

13. Now so far as the reliance placed upon Rules 27 and 29 of theKarnataka Value Added Tax Rules, 2005 and the submission on behalfof the purchasing dealers that under the provisions of the Rules 2005,Gmore particularly under Rules 27 & 29, the only requirement is to issuethe tax invoice and to produce the same and there is no other requirementis concerned, the aforesaid has no substance. Rule 27 cast an obligationon the dealers to issue tax invoice and the particulars of the tax invoiceare provided under Rule 29. Merely because the tax invoice as per Rule27 and Rule 29 might have been produced, that by itself cannot be saidH

to be proving the actual physical movement of the goods, which is requiredto be proved, as observed hereinabove. Producing the invoices as perRules 27 and 29 of the Rules 2005 can be said to be proving one of thedocuments, but not all the documents to discharge the burden to provethe genuineness of the transactions as per section 70 of the KVAT Act,2003.

14. Now so far as the reliance upon the decision of the DelhiHigh Court in the case of On Quest Merchandising India Pvt. Ltd. v.Government of NCT of Delhi (Writ Petition (Civil) No. 6093/2017,decided on 26.10.2017), relying upon by the learned counsel appearingon behalf of the purchasing dealers is concerned, at the outset, it isrequired to be noted that before the Delhi High Court, Section 9(2)(g) ofthe Delhi Value Added Tax Act was under consideration, which readsas under:

“9(2)(g) to the dealers or class of dealers unless the tax paid bythe purchasing dealer has actually been deposited by the sellingdealer with the Government or has been lawfully adjusted againstoutput tax liability and correctly reflected in the return filed forthe respective tax period.”

The burden of proof as per Section 70 of the KVAT Act, 2003was not an issue before the Delhi High Court. How and when the burdenof proof can be said to have been discharged to prove the genuinenessof the transactions was not the issue before the Delhi High Court. Asobserved hereinabove, while claiming ITC as per section 70 of the KVATAct, 2003, the purchasing dealer has to prove the genuineness of thetransaction and as per section 70 of the KVAT Act, 2003, the burden isupon the purchasing dealer to prove the same while claiming ITC.

15. In view of the above and for the reasons stated above and inabsence of any further cogent material like furnishing the name andaddress of the selling dealer, details of the vehicle which has deliveredthe goods, payment of freight charges, acknowledgement of takingdelivery of goods, tax invoices and payment particulars etc. and theactual physical movement of the goods by producing the cogent materials,the Assessing Officer was absolutely justified in denying the ITC, whichwas confirmed by the first Appellate Authority. Both, the second AppellateAuthority as well as the High Court have materially erred in allowing theITC despite the concerned purchasing dealers failed to prove the A

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Agenuineness of the transactions and failed to discharge the burden ofproof as per section 70 of the KVAT Act, 2003. The impugned judgment(s)and order(s) passed by the High Court and the second AppellateAuthority allowing the ITC are unsustainable and deserve to be quashedand set aside and are hereby quashed and set aside. The orders passedby the Assessing Officer denying the ITC to the concerned purchasingBdealers, confirmed by the first Appellate Authority are hereby restored.

16. The instant appeals are accordingly allowed. However, thereshall be no order as to costs.

CAnkit Gyan(Assisted by : Aarsh Choudhary, LCRA)

Appeals allowed.

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