1. Parliament has enacted certain draconian provisions in the GST laws. The implications of those provisions, relating to burden of proof, are required to be brought to the notice of GST Professionals. Therefore, this article.

Input Tax Credit

  1. Section 155 of the Central Goods & Service Tax Act, 2017 (CGST) casts the burden of proof qua the ITC on the claimant businessman. It reads as follows:

    ‘Where any person claims that he is eligible for input tax credit under this Act, the burden of proving such claim shall lie on such person.’

  2. Parliament should have thought of the capacity and functioning of the bureaucracy before enacting such provision. Several registrations were cancelled for one or the other reason in the year 2017 itself and those were thereafter restored under the Proviso to Section 30(1) in the F. Y. 2019-2020. The data of outward supplies of such persons was not available for matching. Further, the system of allowing ITC is absolutely one sided. In the current return filing scenario, the supplier uploads his invoices through GSTR 1, which eventually reflects in the ITC of claimant dealer’s 2A. If the supplier misses out uploading some invoices the purchaser does not have any facility to upload the invoices on his own. It could have been possible, if original plan of GSTR 1-2-3 had been implemented by the Government. In such circumstances, it is impossible to discharge the burden so cast under Section 155.

  3. Even though the terms, ‘Burden of Proof’ and ‘Onus of Proof’ are being used interchangeably, still, those have definite meanings. The Bombay High Court in the case of Phoenix Mill Ltd. Vs. Union of India, 2004 (168) ELT 310 has lucidly explained the difference between the two in the following words,

    ‘There is essential distinction between burden of proof and onus of proof. The burden of proof lies upon the person who has to prove a fact and it never shifts. However, the onus of proof shifts. Onus means a duty of adducing evidence.’

  4. The term burden of proof used in Section 155, in the circumstances narrated above, is required to be interpreted to mean onus of proof. It would shift to the departmental officials if no data or improper or insufficient data is available.

  5. No doubt the ITC is the form of concession. Therefore, the law prescribing the grant of ITC subject to the compliance of the conditions is always upheld by the Supreme Court. Thus, the constitutional validity of the law granting ITC qua inter-State sale conditional on the production of C Form has been upheld by the Court in TVS Motors vs. State of Tamil Nadu, 2018 (18) GSTL 769. It be noted that the condition prescribed therein of filing of C form was capable of performance and the legal burden could be cast on the claimant dealer. Therefore, it’s validity was upheld. But even conditions for concessions are governed by Part III of the Constitution and hence cannot be arbitrary or unreasonable, or violative of any constitutional or fundamental right.

Presumption of Culpable Mental State:

  1. This is another draconian provision. It is enacted under Section 135 of the Act. However, it applies only to cases wherein the prosecution proceedings have commenced. It does not apply to normal penalty proceedings. The Telangana High Court in the case of P. V. Ramanna Reddy vs. Union of India, 2019(25) GSTL 185 has refused to give an interim protection against the arrest to the high ranking officials of the Corporates which were alleged to be involved in the circular trading. The apex court approved the order of the High Court. It is reported in 2019 (26) GSTL J175. It is now quite possible that to extract the revenue the prosecutions will be liberally sanctioned. Therefore, it is necessary to understand this provision and the onus involved therein.

  2. The law was otherwise earlier. The accused was presumed to be innocent and the onus was on the prosecution to prove the guilt of the accused. However, this initial onus on the Department could be sufficiently discharged by the circumstantial evidence. The law did not require the prosecution to prove impossible. All that was required was the establishment of such a degree of probability that a prudent man might, on the basis, believe in the existence of the fact in issue. The legal proof is not necessarily a perfect proof, often it is nothing more than a prudent man’s estimate as to the probabilities of the case. Kindly see Issardas Daulat Ram vs. Union of India (1962) Supp.(1) SCR 358. Also see M/s Kanungo & Co. vs. Union of India, AIR 1972 SC 1236. This principle can be explained with the help of examples. Once it is shown that the accused was travelling without a ticket, prima facie case against him is proved. If he once had such a ticket and lost it, it will be for him to prove this fact within his special knowledge. Similarly, if a person is proved to be in recent possession of stolen goods, the prosecution would be deemed to have established the charge that he was either the thief or had received those stolen goods knowing them to be stolen. If his possession was innocent and lacked the requisite incriminating knowledge, then it will be for him to explain or establish those facts within his peculiar knowledge, failing which the prosecution would be entitled to take advantage of the presumption of fact arising against him, in discharging the burden of proof. Similar is the case when some fake invoices printed in the name of B are found in the possession of A and prosecution proceedings are commenced against A. Thus, the prosecution would be deemed to have discharged its burden if it adduces only so much evidence, circumstantial or direct, as is sufficient, to raise a presumption in its favour with regard to the existence of fact sought to be proved.

  3. I have discussed the earlier law only with the intention to prove that it was not at all necessary to introduce a provision providing for reverse burden. Section 135 of the GST laws has now placed reverse burden on the accused. Thus, if A prints fake invoices in the name of B and circulates the same in the market without his knowledge then in the prosecution proceedings against B, the court shall presume the knowledge of this fact on B’s part. This is a draconian provision and the constitutionality thereof is required to be challenged more particularly because the investigation in our country is never fair. The constitutionality of the similar provision has been upheld by the Supreme Court in the case of Noor Aga vs. State of Punjab and Another (2008) 16 SCC 417. However, this judgement relates to the import of heroin and the law under consideration was Narcotic Drugs and Psychotropic Substances Act,1985.

  4. Even if the Court has upheld the constitutionality, Their Lordships have laid down certain principles, some of which would apply to all such enactments in India. The gist thereof is stated below:

    1. The procedures laid down in these provisions should be strictly complied with;

    2. The prosecution must first establish the basic facts. Placing persuasive burden on the accused persons must justify the loss of protection which would be suffered by the accused;

    3. The trial should be a fair trial;

    4. The accused should not suffer punishment on the basis of past experience;

    5. Considering the provisions, the heightened scrutiny test would be necessary to be applied;

    6. Suspicion, however high it may be, can under no circumstances, be held to be substitute for legal evidence;

    7. The provision, no doubt, raises presumption with regard to the culpable mental state on the part of the accused as also place burden of proof in this behalf on the accused, but presumption would operate in the trial of the accused only in the event the circumstances contained therein are fully satisfied. An initial burden exists upon the prosecution and only when it stands satisfied, would the legal burden shift. Even then, the standard of proof required for the accused to prove his innocence is not as high as that of the prosecution. Whereas the standard of proof required to prove the guilt of the accused on the prosecution is ‘beyond all reasonable doubts’ but it is, ‘preponderance of probability ‘on the accused. If the prosecution fails to prove the foundational facts so as to attract the rigours of the law, the guilt can’t be said to have been established;

    8. A confessional statement becomes relevant for the purpose of proving the truth of fact only when it is signed before the competent authority and made during the course of enquiry;

    9. Confessional statement is an evidence weak in nature;

    10. A retracted confessional statement may be relied upon but a rider must be attached thereto, namely, it is made voluntary. The burden of proving that such a statement was made voluntarily is on the prosecution.

(Principles stated in Para Nos. I to VII apply to Section 135 and from VIII to X apply to Section 136 of GST laws.)


  1. The law laid down by the apex court in the case of Vinod Solanki vs. Union of India, 2009 (13) STR 337as regards retraction of confessional statement is now required to be understood considering the reverse burden, as discussed above, and the observations of the Supreme Court in Noor Aga case.


  1. If the revenue relies on certain material against the assesse for the purpose of fastening the liability, it should provide the copies thereof to the assesse and if need be also the cross examination of the persons from whom such material was obtained. SeeVasanji Gela vs. The State of Maharashtra, (1977) 40 STC 544.See also the judgment of the Supreme Court in Yashwant Sinha vs. CBI, 2019 (25) GSTL (161). This judgement is under the RTI Act and has given new approach to the provisions of Evidence Act.


  1. Section 35(6) of the CGST states that the proper officer can determine the tax liability if there is discrepancy. It be noted that even in this provision it is only the onus of proof is involved and the same shall shift after proper explanation.

Transaction Value

  1. The transaction value declared by the assesse can’t be rejected on the basis of earlier transactions. The Revenue is required to adduce contemporaneous evidence to reject the value so declared. The burden of proof is on the revenue. See Commissioner of Customs, Mumbai vs. J. D. Orgochem Ltd. 2008 (226) ELT 9 SC.


  1. The burden of proving the correct entry or sub entry which would squarely cover the particular commodity is always on the Revenue. See H. P. L. Chemicals Ltd. vs. Commissioner of Central Excise, Chandigarh, 2006 (197) ELT 324, SC. However, it does not mean that the assesse should not lead any evidence. In fact, at the first available opportunity the assesse should submit entire relevant material before the authorities. The material will include the product composition, literature, label, character, expert’s opinion, user’s certificate etc. Such documents should be submitted even if it is felt that the product is covered by some judgment. The latest controversy relates to the classification of Hand Rub (Sanitiser). The claim is under C. H. No. 3004.90.87 wherein the tax rate is 6%. The entry reads as ,’ Antibacterial Formulation used as medicament for prophylactic or therapeutic use.’ The product Povidone Iodine Cleansing Solution which has been held as medicament by the Supreme Court in the case of Commissioner of C. E. vs. Wockhardt Life Science Ltd. 2012 (277) ELT (299)and the product Hand Rub have similar use. Both of them are for prevention of deceases. However, instead of only relying upon the judgment, evidence as aforesaid should be adduced.


  1. Onus of proof of fulfilment of conditions subject to which the exemption is granted under the Notification is always on the assesse or the claimant who claims the benefit under that Notification. See Collector of Customs Vs. Presto industries, 2001 (128) ELT 321 SC.

  2. Burden of Proof under the GST Laws is the vast subject. There is legal burden as well as evidentiary burden. I have made attempt to explain only a few of it’s kind.

Posted in May.

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