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

This judgment addresses a group of similar writ petitions, with CWJC No. 17914 of 2023 (M/s Utkrisht Trade Solutions Pvt. Ltd.) treated as the lead case.

Judgment Summary

1. Outcome
The writ petitions were allowed. The impugned orders passed by the Adjudicating Authority (Deputy Commissioner of State Tax) and the Appellate Authority (Additional Commissioner of State Tax), which had 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 with specific directions.

2. Core Issue
The central legal question before the Court was whether a registered person is entitled to claim Input Tax Credit (ITC) under Section 16(2)(b) of the CGST/BGST Act, 2017, when the goods are delivered directly by the supplier to the end consumer on the registered person's direction, without the goods being physically received at the registered person's premises.

In essence, the issue is whether the condition "he has received the goods" under Section 16(2)(b) necessitates physical receipt by the claimant, or if the "deemed receipt" provision under the Explanation to the clause is sufficient.

3. Key Facts
* The petitioners are registered dealers who claimed ITC on their inward supplies for various tax periods.
* Their business model involves purchasing goods from a supplier and instructing the supplier to ship the goods directly to the end customer. This is commonly known as a "bill to, ship to" model.
* The GST authorities initiated proceedings, alleging that since the petitioners did not physically receive the goods at their place of business, they failed to satisfy the condition under Section 16(2)(b) of the CGST/BGST Act.
* The Adjudicating Authority denied the ITC claims solely on the ground of non-receipt of goods.
* The petitioners' appeals were dismissed by the First Appellate Authority, which upheld the original orders.
* Aggrieved by these concurrent findings, the petitioners filed writ petitions before the High Court.

4. Arguments

• Petitioner's Arguments:

  • The petitioners contended that they fulfilled all substantive conditions for availing ITC under Section 16, including being in possession of tax invoices and ensuring that the supplier had paid the tax to the government.
  • They argued that the term "received the goods" in Section 16(2)(b) must be read along with the Explanation to that clause.
  • The Explanation creates a legal fiction of "deemed receipt" where goods are delivered to a third party on the direction of the registered person. Their business model falls squarely within this Explanation.
  • The requirement of physical receipt is archaic and does not align with modern business practices, which the GST law accommodates through the deeming provision.
  • The precedents relied upon by the department were distinguishable, as they either pertained to cases where the supplier had defaulted in paying tax (Aastha Enterprises) or dealt with the general burden of proof under a different statute without interpreting the specific deeming provision of Section 16(2)(b) (State of Karnataka vs. M/s Ecom Gill).

• Respondent's (State's) Arguments:

  • The State argued that the physical movement and receipt of goods by the dealer are mandatory for claiming ITC, as implied by Section 16(2)(b) read with Section 31 (Tax Invoice).
  • They placed heavy reliance on the principle that the burden of proof to substantiate an ITC claim lies on the assessee under Section 155 of the CGST Act.
  • They contended that in the absence of evidence of physical receipt, the transactions were merely on paper, and the ITC claim was not genuine.

5. Court’s Reasoning
* The Court held that the authorities had interpreted Section 16(2)(b) in an overly restrictive and erroneous manner by ignoring the Explanation appended to it.
* It clarified that the Explanation to Section 16(2)(b) explicitly creates a "deeming fiction". When goods are delivered by a supplier to any other person (the end consumer) on the direction of the registered person (the petitioner), the registered person is deemed to have received the goods.
* The Court observed that physical possession is not the sole criterion for determining receipt under the CGST Act. The law specifically accommodates business models like "bill to, ship to" to facilitate trade and avoid unnecessary logistical costs.
* The authorities failed to apply their minds to the documents and evidence submitted by the petitioners to prove the existence of such a business model (e.g., agreements, purchase orders, delivery instructions). Their denial of ITC was based on a flawed premise that physical receipt was non-negotiable.
* The Court distinguished the precedents cited by the State, finding them inapplicable to the specific legal issue at hand.
* Consequently, the Court concluded that the matter required fresh consideration by the Adjudicating Authority, with a specific direction to examine the transactions in light of the correct legal interpretation of Section 16(2)(b) and its Explanation. The authority was directed to verify the documentary evidence proving the "bill to, ship to" arrangement.

6. Statutory References
* Central Goods and Services Tax Act, 2017 (CGST Act):
* Section 16(2)(b) & its Explanation: Core provision regarding the condition of receipt of goods for ITC eligibility.
* Section 16(1): General eligibility for ITC.
* Section 31: Tax Invoice.
* Section 35: Accounts and other records.
* Section 73: Determination of tax in non-fraud cases.
* Section 107: Appeals to Appellate Authority.
* Section 155: Burden of proof.
* Circulars:
* Circular No. 241/35/2024-GST dated 31.12.2024.

7. Precedents Cited
* Aastha Enterprises vs. The State of Bihar and Another (CWJC No. 10359 of 2023) - Distinguished by the Court.
* State of Karnataka vs. M/s Ecom Gill Trading Private Limited (2023 SCC OnLine SC 248) - Distinguished by the Court.
* SAJ Food Products Pvt. Ltd vs. The State of Bihar and Others (CWJC No. 15465 of 2022) - Distinguished by the Court.