Burden To Prove The Actual Physical Movement Of The Goods Is Upon The Purchasing Dealer For Availament Of Input Tax Credit : High Court Of Allahabad

Title: M/S Malik Traders v State Of U.P. And 2 Other

Citation: WRIT TAX No. – 1237 of 2021

Decided On: 18.10.2023

Coram: Justice Rahul Divedi


The current Writ Tax is accepted by the Court in view of the fact that G.S.T. Tribunal is not functional in the State of Uttar Pradesh pursuant to the Gazette notification of the Central Government, dated 14.09.2023. proceedings of Section 74 of UP GST Act was initiated demanding Rs. 12,32,148/- as wrong availment of input tax credit which was confirmed by the impugned order dated 6.3.2021.


petitioner is a registered dealer, and he is engaged in the purchase and sale of waste materials, plastic scrap, paper scrap and metal scrap. The petitioner from April 2018 to September 2019 has disclosed the turnover of Rs. 34,22,634/- on which input tax credit of Rs. 6,16,074.12/- was availed.

Thereafter a show cause notice was issued on 23.1.2019 under Section 74 of UP GST Act on the ground of wrong availment of input tax credit to which a reply was submitted by the petitioner. Later on tax liability to the tune of Rs. 6,16,074/- along with penalty of Rs. 6,16,074/- total amount Rs. 12,32,148/- was demanded from the petitioner by the order dated 4.10.2019.

It was argued that the benefit of tax credit in the G.S.T. regime is being brought with intention to avoid cascading effect and once the tax has been charged on the bill and paid by the petitioner through banking channel, the benefit of input tax credit cannot be denied.

It is submitted that petitioner has rightly discharged its tax liability by paying the tax charged on the bills raised by the selling dealer and if the selling dealer have not deposited the tax so charged from the petitioner, the selling dealer shall be penalized and not the petitioner.

On the other hand Mr. Rishi Kumar, learned A.C.S.C. has supported the impugned orders and submitted that under Section 16 of UP GST Act it has been provided that input tax credit can be availed with certain conditions stipulated therein, in the event of non-fulfilment of such conditions as enumerated therein, the benefit of input tax credit cannot be accorded.

or availment of input tax credit, the petitioner is duty bound to prove beyond any reasonable doubt and establish that actual transaction took place and merely furnishing the details of tax invoices, e-way bills, GR is not sufficient. The petitioner was required to give details i.e. vehicle number which were used for transportation of goods, payment of freight charged, acknowledgement of taking delivery of goods and payment etc.

Court’s Analysis and Judgement:

In the case of State of Karnataka Vs. M/s Ecom Gill Coffee Trading Private and in M/s Aastha Enterprises Vs. State of Bihar, it has been held that the burden to prove the actual physical movement of the goods is upon the purchasing dealer for availament of input tax credit.

According to Section 16 of U.P.G.S.T. every registered dealer can claim the benefit of input tax credit only on fulfilment of certain conditions as enumerated under the Act. And section 74 of U.P.G.S.T. it is clear that determination of tax 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 empowers to issue notice that tax has not been paid or short paid or erroneously refunded or input tax credit has wrongly been availed or utilized by any reason or wilful misstatement or suppression of fact.

the petitioner has only brought on record the tax invoices, e-way bills, GR and payment through banking channel, but no such details such as payment of freight charges, acknowledgement of taking delivery of goods, toll receipts and payment thereof has been provided. Thus in the absence of these documents, the actual physical movement of goods and genuineness of transportation as well as transaction cannot be established thus the proceeding has rightly been initiated against the petitioner.

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Written By: Sushant Kumar Sharma

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