QUESTION

Tax payer has taken Registration and he wanted to change the legal name and applied for another registration. After new registration, he has applied for cancellation of old registration. But he has taken credits of new registration in the old registration and debited the duties on sales of old registration. Now audit raised the point as ineligible credit.

ANSWER

Facts of the case:
A person was registered under the name and style of X & Company in a particular state. Further he got registered under the name and style of Y & Company in the same state. ITC on purchase invoices of X & Company has been taken by Y & Company.
The case is related to the financial year 2017-18. As of now X & Company has surrendered registration and only Y & Company is operating.
The audit party raised objection on above mentioned ITC.

Questions:
(1) Whether the audit party is right?
(2) Is there any remedy available?

LAW APPLICABLE:

Section 25(4): A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act.

Section 16: Eligibility and conditions for taking input tax credit.

(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.

(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,''

a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;
b) he has received the goods or services or both.

Explanation. 'For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services''

(i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

(ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person.

c) 'subject to the provisions of section 41,the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and

d) he has furnished the return under section 39:

Provided that where the goods against an invoice are received in lots or installments, the registered person shall be entitled to take credit upon receipt of the last lot or installment:

Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed:

Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon.

(3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961, the input tax credit on the said tax component shall not be allowed.

(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.

Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019.

REPLY:

(1) When a person is having two registrations for two different verticals then they are considered as distinct person. In layman’s language from the GST point of view these two are independent registrations. Accordingly Y & Company cannot take ITC on the purchase of X & Company. Therefore, the audit party is right.

(2) Since the case is related to the financial year 2017-18, the time limit relating to rectifications is lapsed.

(3) If you are looking for any relief on the ground that both the companies are registered under single PAN and the GST law was new during the relevant time then this argument is difficult to be accepted by any authority below the High Court.

So we suggest you to not go for litigation if the amount is not huge. (Reply dt. 21/09/2021)