M/S Bathla Teletech Pvt Ltd vs The State Of Bihar on 11 April, 2025

Judgment Summary

Case: M/S Bathla Teletech Pvt Ltd vs The State Of Bihar (Lead Case: M/s Utkrisht Trade Solutions Pvt. Ltd. vs The State of Bihar)
Court: High Court of Judicature at Patna
Date of Judgment: April 11, 2025

1. Outcome

The writ petitions were allowed. The impugned orders passed by the Adjudicating Authority and the Appellate Authority, which denied Input Tax Credit (ITC) to the petitioners, were set aside.

The matter was remanded back to the Deputy Commissioner of State Tax for a fresh adjudication. The authority was directed to re-examine the petitioner's ITC claim based on the correct interpretation of the law, specifically focusing on documentary evidence of the "bill to ship to" transaction model, and to pass a fresh order within six months.

2. Core Issue

The central legal question was whether a registered person (the dealer) must physically receive goods to be eligible for Input Tax Credit under Section 16(2)(b) of the CGST/BGST Act, 2017.

Specifically, the Court examined if "deemed receipt" of goods, as contemplated in the Explanation to Section 16(2)(b), is sufficient. This applies to business models where the dealer instructs the supplier to deliver goods directly to the end customer (a "bill to ship to" model) without the goods physically reaching the dealer's premises.

3. Key Facts

• The petitioners are registered dealers who claimed ITC on goods purchased from suppliers for onward sale.
• Their business model involved purchasing goods and instructing the original supplier to ship them directly to the end customer to save on logistics costs and time.
• The GST authorities initiated proceedings, alleging that since the petitioners never physically received the goods, they failed to satisfy the condition under Section 16(2)(b) of the CGST Act.
• The Adjudicating Authority disallowed the ITC claim, and this decision was upheld by the first Appellate Authority, leading to the present writ petitions before the High Court.
• It was not disputed by the Revenue that the petitioners had paid the tax to their suppliers, and the suppliers had, in turn, deposited this tax with the Government.

4. Arguments

Petitioner's Arguments:
* They fulfilled all conditions for claiming ITC under Section 16, including payment of tax to the supplier, who remitted it to the government.
* The "receipt of goods" under Section 16(2)(b) does not necessarily mean physical receipt. The Explanation to Section 16(2)(b) creates a legal fiction where a registered person is deemed to have received the goods if they are delivered to any other person on their direction.
* Their "bill to ship to" model is a standard, efficient business practice explicitly covered by this deeming provision.
* The precedents relied upon by the department were distinguishable:
* Aastha Enterprises: In that case, the supplier had defaulted on tax payment, which is not the situation here.
* State of Karnataka vs. M/s Ecom Gill Trading: This case dealt with the burden of proof under the VAT regime and did not interpret the specific deeming provision under the GST law.

Respondent's (State's) Arguments:
* Physical receipt of goods is a mandatory precondition for claiming ITC under Section 16(2)(b).
* The transactions were merely "paper transactions" without the actual movement of goods to the petitioner.
* The burden of proving the correctness of the ITC claim, including the actual transaction and movement of goods, lies entirely on the assessee, as established in M/s Ecom Gill Trading.
* The petitioner failed to provide sufficient documentary proof like an agreement/MOU for such a "bill to ship to" arrangement.

5. Court’s Reasoning

• The Court held that the interpretation of "receipt of goods" by the tax authorities was overly restrictive and legally incorrect.
• It emphasized the Explanation to Section 16(2)(b) of the CGST Act, which explicitly creates a "deemed receipt" scenario. This provision clarifies that if a supplier delivers goods to a third party on the direction of the registered person (the buyer), the registered person is considered to have received the goods.
• The Court noted that the GST law marks a departure from previous tax regimes (like Central Excise) where physical receipt at the registered premises was often mandatory. The concept of "deemed receipt" is designed to facilitate modern business practices like "bill to ship to".
• The authorities below failed to apply their minds to this crucial legal provision and instead rejected the claim mechanically on the sole ground of non-physical receipt.
• The Court distinguished the precedents cited by the Revenue, finding them inapplicable to the facts and the specific legal provision in question.
• Since the foundational reason for denial was legally flawed, the Court remanded the matter. It directed the authority to freshly examine the transactions, not on the basis of physical receipt, but by verifying the documentary evidence proving the "bill to ship to" arrangement (e.g., contracts, purchase orders, invoices, delivery instructions, and proof of delivery to the end customer).

6. Statutory References

• Central Goods and Services Tax Act, 2017 (CGST Act):
  • Section 16(2)(b) & its Explanation: Condition for ITC that the registered person has "received the goods or services or both".
  • Section 31: Tax Invoice.
  • Section 35: Accounts and other records.
  • Section 73: Determination of tax.
  • Section 107: Appeals.
  • Section 155: Burden of proof.
• Bihar Goods and Services Tax Act, 2017 (BGST Act): Corresponding provisions.
• Central Goods and Services Tax Rules, 2017 (CGST Rules): Rule 36.

7. Precedents Cited

• Aastha Enterprises vs. The State of Bihar (CWJC No. 10359 of 2023): Distinguished by the Court on the fact that the supplier in that case had not paid tax to the government.
• State of Karnataka vs. M/s Ecom Gill Trading Private Limited (2023 SCC OnLine SC 248): Distinguished as it pertained to the burden of proof under the KVAT Act and did not deal with the "deemed receipt" provision under the CGST Act.
• SAJ Food Products Pvt. Ltd vs. The State of Bihar (CWJC No. 15465 of 2022): Noted but found not directly relevant to the core issue of deemed receipt.