Facts of the Case

The petitioners, M/s. Recom Equipments & Controls and another, had claimed Input Tax Credit (ITC) in respect of goods stated to have been imported, on which IGST had been paid. The State GST authority denied the ITC claim on the ground that the goods in question were not shown to have been imported, and that unless the customs authority certified the import of the goods, the State GST authority was not in a position to allow the claim. This resulted in an adjudication order dated 16th August, 2023, against which the petitioners approached the Calcutta High Court in WPA 26026 of 2023. Pursuant to an earlier order of the Court dated 18th December, 2023, the customs authority (Commissioner of Customs, Air Cargo Export) was directed to file written instructions on the import status of the goods. On 20th December, 2023, the customs authority certified that, out of nine imports on which ITC was claimed, eight had in fact been imported with IGST paid thereon; it was, however, unable to certify the position in respect of the one remaining bill of entry.

Issues Involved

  1. Whether the State GST authority was justified in denying the petitioners' ITC claim in the absence of customs certification of the underlying imports.
  2. Whether the adjudication order dated 16th August, 2023 could be sustained once the customs authority certified the import of eight out of nine consignments.
  3. What relief was available to the petitioners for the one import in respect of which the customs authority could not locate or certify the bill of entry.

Petitioner's Arguments

  • The petitioners contended that the ITC claim had been wrongly denied merely because the State GST authority was awaiting customs certification, when the underlying imports were genuine and IGST had actually been paid.
  • They relied on the written instruction dated 20th December, 2023 issued by the Commissioner of Customs (Air Cargo Export), which corroborated the import and payment of IGST for eight of the nine consignments.
  • The petitioners undertook to place the customs instruction, together with a copy of the writ petition, before the State GST authority for consideration.
  • For the one import where the bill of entry was not traceable, the petitioners sought liberty to approach the customs authority afresh with supporting documents.

Respondent's Arguments

  • The State GST authority maintained that ITC could not be allowed unless the customs authority certified that the goods on which credit was claimed were, in fact, imported.
  • Counsel for the customs authority placed the written instruction dated 20th December, 2023 on record, confirming import and IGST payment for eight of the nine transactions while flagging the absence of a traceable bill of entry for the remaining one.
  • Counsel for the customs authority also pointed out a typographical error in the earlier record of the writ petition number (wrongly noted as WPA 260 of 2023 instead of WPA 26026 of 2023), which was placed on record for correction.

Court Order/Findings

  • The Court noted that the customs authority's instruction dated 20th December, 2023 certified that eight out of nine imports on which ITC was claimed were, in fact, imported with IGST paid, resolving the principal ground on which the State GST authority had withheld the credit.
  • The Court held that once customs certification of the imports was available, the State GST authority's denial of ITC could no longer be sustained, and directed fresh adjudication in accordance with law.
  • The impugned adjudication order dated 16th August, 2023 was set aside, and the adjudicating authority of the State GST was directed to pass a fresh adjudication order within two weeks of receipt and to allow the ITC claim in accordance with law.
  • Liberty was reserved for the petitioners to approach the customs authority with supporting documents for the one import whose bill of entry was not available with the customs authority.

Important Clarification

  • Denial of ITC solely on the ground of pending customs certification of imports cannot be sustained once the customs authority itself certifies the factum of import and payment of IGST.
  • Coordination between customs records and GST adjudication is essential where ITC eligibility turns on verification of import; courts will direct fresh adjudication rather than leave a taxpayer remediless once such certification becomes available.
  • Where a specific bill of entry cannot be traced or certified by the customs authority, the taxpayer retains the liberty to independently approach the customs authority with supporting documents rather than suffering an automatic denial of credit on that portion.

Sections Involved

  • Input Tax Credit provisions, CGST/WBGST Act, 2017 — govern a registered person's entitlement to credit of tax paid on inward supplies, including imports on which IGST is paid.
  • IGST Act, 2017 — levies integrated tax on imports, credit of which forms the basis of the ITC claim in dispute.

Decision – In Favour of

Decided substantially in favour of the Assessee. The adjudication order denying ITC was set aside and the adjudicating authority was directed to allow the ITC claim in accordance with law for the eight certified imports, while the petitioners were given liberty to pursue certification for the remaining one import before the customs authority.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court at Calcutta
  • Case No.: WPA 26026 of 2023
  • CNR: Not available on record
  • Coram: Hon'ble Mr. Justice Md. Nizamuddin
  • Decision Date: 21 December 2023
  • Disposal Nature: Disposed of — adjudication order set aside, fresh adjudication directed allowing ITC claim

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