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Input Transaction are genuine & supported by valid documents then ITC can Not be denied
Payment along with tax actually paid to supplier or not is to be verified before disallowing ITC (LGW Industries Ltd. v. Union of India - [2022])
- Petitioner was served with letters by the GST Dept, alleging that its suppliers were false and non-existent.
- GST dept. claimed that the validity of suppliers was not confirmed prior to transactions, thus it refused to issue Input Tax Credit on purchases from the suppliers and demanded that the petitioner pay a penalty and interest under the relevant provisions of the GST Act. The petitioner filed a writ petition in response to the ruling.
- The Hon'ble High Court found that. When Names of Suppliers as a registered taxable person were already available with the Govt record & on the GST portal at the time of the transaction, the petitioner could not be blamed if they afterwards seemed to be fraudulent, The petitioner was served with letters by the GST Dept., alleging that its suppliers were false and non-existent.
- As a consequence, it cannot be argued that the petitioners failed to comply with any statutory responsibility prior to entering the transactions in question or to verify the legitimacy of the suppliers in question.
- Benefit of Input Tax credit was held to be allowed if the purchases were legitimate and backed by papers, and it was directed to verify whether payment, including tax, was truly paid to suppliers and transactions were completed before the cancellation of the suppliers' registration.
