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

Judgment Summary: M/S Bathla Teletech Pvt. Ltd vs The State Of Bihar

Date of Judgment: 11 April, 2025
Bench: Hon’ble Mr. Justice P. B. Bajanthri, Hon’ble Mr. Justice Alok Kumar Sinha
Lead Case: M/s Utkrisht Trade Solutions Pvt. Ltd. vs. The State of Bihar (CWJC No. 17914 of 2023)

1. Outcome

The High Court allowed the writ petitions. The impugned orders passed by the Deputy Commissioner of State Tax and the Additional Commissioner of State Tax (Appeal), which had rejected the petitioners' claims for Input Tax Credit (ITC), were set aside. The matter was remanded back to the Deputy Commissioner for a fresh assessment in light of the Court's observations, to be completed within six months.

2. Core Issue

The central legal question was whether the condition of "receipt of goods" under Section 16(2)(b) of the CGST/BGST Act, 2017, for the purpose of availing ITC, mandates the physical delivery of goods to the registered person (the dealer), or if it also covers "deemed receipt" in cases where goods are delivered directly by the supplier to a third party (the end consumer) on the dealer's instruction.

3. Key Facts

• The petitioners are registered dealers who claimed ITC on goods purchased from their suppliers.
• Their business model involved a "bill to ship to" arrangement where, for logistical efficiency, they would instruct their suppliers to deliver the goods directly to the end consumers.
• The GST authorities rejected the ITC claims on the sole ground that the petitioners had not physically received the goods at their premises, which they contended was a mandatory requirement under Section 16(2)(b).
• The initial rejection by the adjudicating authority was upheld by the first appellate authority, leading the petitioners to file writ petitions before the Patna High Court.

4. Arguments

• Petitioner's Arguments (Assessee):

  • The rejection of ITC is unjust as all other conditions under Section 16 were met: they possessed valid tax invoices, made payments to the supplier (including tax), and the supplier had deposited the tax with the government.
  • The Explanation to Section 16(2)(b) creates a "deeming fiction" which explicitly allows for ITC in "bill to ship to" models. It states that a registered person is deemed to have received goods if the supplier delivers them to another person on their direction.
  • Physical movement of goods to the dealer's premises is not a prerequisite for claiming ITC under the GST framework, which is a departure from older tax regimes.
  • The precedents relied upon by the department were factually distinguishable and incorrectly applied.

• Respondent's Arguments (Revenue Department):

  • Section 16(2)(b) must be interpreted strictly to mean actual, physical receipt of goods by the dealer to prevent fraudulent paper transactions and ensure the integrity of the tax chain.
  • The burden of proof, as per Section 155 of the CGST Act, lies entirely on the assessee to prove the genuineness of the transaction and their eligibility for ITC.
  • Mere production of invoices is insufficient; the assessee must prove the actual transaction, including the delivery of goods.

5. Court’s Reasoning

• The Court’s analysis focused on the plain reading and legislative intent of Section 16(2)(b) and its Explanation.
• It held that physical receipt of goods is not a mandatory pre-condition for claiming ITC. The term "received" must be interpreted in conjunction with the deeming fiction provided in the Explanation.
• The Explanation to Section 16(2)(b) is clear and unambiguous: it expands the concept of receipt to include scenarios where goods are delivered to a third party on the direction of the registered person. This provision is specifically designed to facilitate modern business practices like the "bill to ship to" model.
• The Court found that the tax authorities had erred by adopting an overly restrictive interpretation and failing to apply their minds to the statutory Explanation. This amounted to a non-application of mind.
• While upholding the assessee's interpretation, the Court clarified that the genuineness of the transaction is paramount. On remand, the assessee must produce documentary evidence to substantiate their claim, such as agreements or Memorandums of Understanding (MOU) with the supplier, and proof of delivery instructions and execution to the end consumer.
• The Court distinguished the precedents cited by the Revenue. It noted that Aastha Enterprises dealt with a non-compliant supplier who failed to pay tax (not the case here), and State of Karnataka vs. M/s Ecom Gill established the burden of proof but did not mandate physical receipt of goods.

6. Statutory References

• Central Goods and Services Tax Act, 2017 (CGST Act) / Bihar Goods and Services Tax Act, 2017 (BGST Act):
  • Section 16: Eligibility and conditions for taking ITC, particularly Section 16(2)(b) and its Explanation.
  • Section 31: Tax Invoice.
  • Section 35: Accounts and other records.
  • Section 73: Determination of tax.
  • Section 107: Appeals to Appellate Authority.
  • Section 155: Burden of proof.

7. Precedents Cited

• Cited by the Revenue and Distinguished by the Court:
  1. Aastha Enterprises vs. The State of Bihar (CWJC No. 10359 of 2023)
  2. State of Karnataka vs. M/s Ecom Gill Trading Private Limited (2023 SCC OnLine SC 248)
  3. SAJ Food Products Pvt. Ltd vs. The State of Bihar and Others (CWJC No. 15465 of 2022)