Reply to GST Show Cause Notice for Disallowance of ITC and Alleged Bogus Purchases – Full Legal Draft with Explanation
Date:- ___________
To
The Assistant Commissioner,
Central/State GST Department,
[Full Office Address],
[City, State].
Subject: Reply to GST Show Cause Notice for Disallowance of ITC and Allegation of Bogus Purchase – FY 2022-23/ 2023-24/ 2024-25
GSTIN: [Enter GSTIN]
Reference No. of SCN: [Insert SCN Number]
Date: [Insert Date]
Introduction
When compliance is unwavering and records speak louder than speculation, allegations of bogus purchases deserve more than a cursory glance—they demand the truth backed by facts.
This reply is being submitted in response to the Show Cause Notice issued under Section 74 of the Central Goods and Services Tax Act, 2017, questioning the eligibility of Input Tax Credit (ITC) and alleging bogus purchases made by the registered taxpayer during FY 2023–24.
This representation is made in good faith and in full compliance with the provisions of the CGST Act and rules framed thereunder.
1. Factual Background – Nature of Purchases and Receipt of Goods
The purchases that are the subject of scrutiny were made from genuine suppliers, including but not limited to:
– [Name of Supplier 1] (GSTIN: ………)
– [Name of Supplier 2] (GSTIN: ………)
All goods purchased were actually and physically received at the place of business. Proper documentation in the form of:
– Tax Invoices (as per Rule 46 of CGST Rules, 2017),
– E-way Bills (wherever applicable),
– Delivery Challans (Rule 55),
– Transport Receipts (GR/LR/Bilty),
– Stock Entry Records in Inventory Register, and
– Banking Proof of Payment to Suppliers
has been duly maintained and enclosed herewith.
2. Eligibility of Input Tax Credit – Legal Compliance Under Section 16
It is respectfully submitted that the ITC claimed is fully compliant with Section 16(1) of the CGST Act, 2017, which clearly provides:
“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.”
We affirm that all four conditions prescribed under Section 16(2) were fulfilled:
a) Possession of a tax invoice issued by the supplier in accordance with Section 31
b) Receipt of goods or services
c) Tax charged has been paid to the Government by the supplier
d) Filing of return under Section 39
Thus, the Input Tax Credit is not only valid but lawfully admissible, and there exists no contravention of provisions under Section 16 or related Rules (Rule 36 and Rule 37).
3. Rebuttal to Allegation of Bogus Purchases
The Show Cause Notice alleges that the supplier is non-existent or bogus, and that no actual movement of goods occurred. This assertion appears to be based solely on the supplier’s cancellation or non-filing of returns post-supply, which is legally insufficient to deny ITC to the recipient.
We respectfully rely on judicial pronouncements including:
– Kay Kay Industries vs Commissioner of Central Excise (2013) 295 ELT 541 (SC)
– Arise India Limited v. Commissioner (Delhi HC)
In absence of any documentary or circumstantial evidence of our involvement in bogus arrangement, this allegation is entirely baseless. Moreover, cessation of supplier operations post-transaction has no bearing on ITC validity, provided that Section 16 conditions are met.
4. Response to Circular Trading Allegation
We strongly deny the allegation of circular trading involving us and any entity, including [e.g., Jamal Traders]. The transactions were linear and conducted in the ordinary course of business.
There is:
– No evidence of round-tripping or self-invoicing
– No reversal of stock or fictitious entries- No unnatural pricing or abnormal turnover ratios
Every transaction is backed by proper invoicing, stock movement evidence, transport records, and bank trail of payments.
5. Principles of Natural Justice and Section 155 Onus
As per Section 155 of the CGST Act, the burden of proof in cases involving denial of ITC lies on the person who denies the credit—i.e., the department. No investigation or corroborative evidence has been placed on record to prove bogus purchase or collusion.
Under Article 14 of the Constitution, arbitrary denial of ITC without inquiry violates principles of equality and fairness, breaching natural justice.
6. Request for Relief – Withdrawal of Proceedings and Reinstatement of ITC
In view of the facts, documents, and judicial precedents cited, we humbly request:
- Withdrawal of the demand raised under the impugned SCN
- Reinstatement of the Input Tax Credit claimed during FY 2023–24
- Closure of proceedings initiated under Section 74 as no fraud, willful misstatement, or suppression of facts exists
7. Enclosures (Attached)
Sr. No. | Description of Document | Remarks |
1 | Copies of Tax Invoices (Supplier-wise) | As per Rule 46 |
2 | Goods Receipt Notes / Delivery Challans | As per Rule 55 |
3 | Transportation Proofs (Lorry Receipt, GR, E-Way Bills) | Goods Movement Proof |
4 | Stock Register Entries | Books of Account Evidence |
5 | Bank Statements showing supplier payments | Financial Trail |
6 | Copies of GSTR-1, GSTR-3B returns filed | Compliance Proof |
7 | Any other relevant communication or declarations | Optional |
8. Closing Statement
This response is submitted sincerely and in compliance with GST law, supported by facts, documents, and judicial principles. We urge your good office to kindly evaluate the submission on merit and dispose of the notice without imposing any penalty or disallowance of ITC.
We reiterate our commitment to GST compliance and welcome any further directions or personal hearing if required.
Thanking You,
Yours Faithfully,
[Your Name]
[Your Designation]
[Business Name]
[GSTIN]
[Conact Details]