Facts of the Case

The petitioner, Shine Abraham, proprietor of M/s. Evershine Agro Spices, Angamaly, Ernakulam, filed this writ petition before the Kerala High Court seeking to quash a communication (Ext.P-3) by which the State Tax Officer, Taxpayer Services Circle, Angamally, communicated the decision to block the petitioner's input tax credit amounting to Rs.16,00,000/-. According to the petitioner, the credit related to supplies received from a firm trading as "M/s. Evershine Agro Spices" at First Floor, Golden Plaza, Angamaly, bearing GSTIN 32AZJPA1985A1ZW. On enquiry, the Enforcement Department found that the registered shutter-room address of that supplying firm had remained closed for a long period, and its owner could not be traced; a Scene Mahazar was accordingly prepared on 08.06.2023 in the presence of independent witnesses. The petitioner's registration certificate (Ext.P1, Form GST REG-06 dated 10.03.2023) and returns for March and April 2023 (Ext.P2, Ext.P2(a)) were placed on record. The matter was heard and decided by Justice Dinesh Kumar Singh on 21.11.2023.

Issues Involved

  1. Whether the communication (Ext.P-3) blocking the petitioner's input tax credit of Rs.16,00,000/- was sustainable where the underlying claim was traced to invoices from a firm found to be non-existent or untraceable at its registered address.
  2. Whether the decision to block input tax credit, being an administrative decision, could be interfered with in writ jurisdiction absent any procedural infirmity.

Petitioner's Arguments

  • Sought quashing of the communication (Ext.P-3) blocking his input tax credit of Rs.16,00,000/-, relying on his own registration certificate (Ext.P1) and the returns filed for March and April 2023 (Ext.P2, Ext.P2(a)) to demonstrate his compliance and registered status.

Respondent's Arguments

  • The Enforcement Department's enquiry found that the registered address of the firm from which the petitioner claimed to have received the supplies had a shutter room that had remained closed for a long period, and its owner could not be found despite attempts.
  • A Scene Mahazar was prepared on 08.06.2023 in the presence of two independent witnesses recording the closure of the premises.
  • It was also noticed that the firm was making fictitious transactions by generating e-way bills, and the input tax credit claim was traceable to fake invoices and, in effect, a fake or non-existent GSTIN.
  • The blocking of input tax credit was accordingly a bona fide administrative/enforcement decision justified on these facts.

Court Order/Findings

  • The Court held that the decision to block input tax credit is an administrative decision and found no substance in the writ petition.
  • Where the input tax credit claim is traced to fake invoices and a supplier whose registered address is found, on physical verification, to be closed or non-existent, the blocking of such credit is a valid administrative/enforcement decision that a writ court will not ordinarily disturb.
  • The writ petition was dismissed, with liberty to the petitioner to avail any other remedy available to him under law.

Important Clarification

  • Blocking of input tax credit under GST law, where the underlying purchase invoices are traced to a fictitious or untraceable supplier verified through a physical spot inspection such as a Scene Mahazar, is treated by courts as a legitimate exercise of administrative/enforcement discretion; a taxpayer aggrieved by such blocking must pursue the statutory remedies available under the GST law rather than invoke writ jurisdiction on the facts alone.

Sections Involved

  • Input Tax Credit provisions, CGST Act, 2017 - govern the eligibility conditions for availing input tax credit, including the genuineness of the underlying supply and invoice, which formed the basis for blocking the credit in this case.
  • Form GST REG-06 - the registration certificate relied upon by the petitioner to demonstrate his own compliance status.

Decision - In Favour of

The decision is in favour of the Department. The writ petition was dismissed and the blocking of input tax credit on account of fake invoices and a fake or untraceable supplier GSTIN was upheld.

Related Case Laws

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

Case Details

  • Court: Kerala High Court
  • Case No.: WP(C) No. 25633 of 2023
  • CNR: Not available on record
  • Coram: Justice Dinesh Kumar Singh
  • Decision Date: 21 November 2023
  • Disposal Nature: Dismissed; blocking of Input Tax Credit on account of fake invoices/fake GSTIN upheld

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