ITC on purchases cannot be denied by simply alleging non-existent without tangible evidence – Madras High Court{Sri Balaji Trading Company V/s Asst. Comm. (ST) (FAC) – (2025) 32 Centax 183 (Mad.)}
Issues:
- Was the denial of ITC justified based solely on the allegation that HUL was non-existent, without tangible evidence?
- Did the department err by not considering the company’s response and supporting documents?
Facts:
- Sri Balaji Trading Company, engaged in the retail and wholesale of FMCG products, claimed ITC on purchases from Hindustan Unilever Limited (HUL) for the financial year 2020 21.
- The GST department issued a show cause notice alleging that HUL was a “fictitious business entity” and a “non-existent supplier,” leading to the blocking of the claimed ITC.
- The company responded, providing invoices and highlighting that the transactions were reflected in their GSTR-2A returns.
- Despite this, the department confirmed the tax demand, including interest and penalties, without considering the company’s reply.
Held:
- The Court found that HUL is a well-established conglomerate in India, and labeling it as “non-existent” without concrete evidence demonstrated a lack of due diligence.
- The impugned order was deemed arbitrary and passed without proper application of mind.
- Consequently, the order was set aside, and the matter was remanded for fresh consideration, directing the department to provide an opportunity for the company to present additional evidence and to conduct a fair hearing before making a new decision
