Facts

M/s ABC Ltd is engaged in the business of Mobile Phones. During the relevant
period, M/s ABC Ltd purchased mobile phones from a vendor and asked him to
deliver the phones directly to its customer in another state. The vendor issued the
tax invoice mentioning M/s ABC Ltd as 'Bill-to' party and customer details of M/s
ABC Ltd as 'Ship-to' party'. The goods were sent directly from the vendor's premises
to the customer's premises. M/s ABC Ltd claimed the ITC on the strength of the tax
invoice issued by its vendor. The department issued a show cause notice denying
the ITC claim to M/s ABC Ltd on account of failure to fulfil one of the mandatory
conditions contained under section 16 of the CGST Act with regard to actual receipt
of goods.

About the Provision

(a) About Section 16(2)

Notwithstanding anything contained in this section, no registered person shall

be entitled to claim Input Tax Credit in respect of any supply of goods or
services or both to him unless 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.

(b) Replying to SCN

Reply to SCN is to be made under Section 73 or Section 74 of the CGST Act,

2017 read with Rule 121 or Rule 142 of the CGST Rules, 2017 as the case
may be. The said reply is required to be made in Form GST DRC-06.

Specimen

Date: <DD/MM/YYYY>

To,
The Jurisdictional GST officer

<PLACE>

Dear Sir/Madam,

Re.: Mr./ Ms./ Mrs./ M/s. <NAME OF INDIVIDUAL/FIRM/COMPANY> -

GSTIN: <……….>

Sub.: Reply to the Show Cause Notice dated…. for the Financial Year <20XX-
XX>

We are in the receipt of the above-mentioned show cause notice dated <DD-MM-
YY> for denial of input tax credit availed on inward supplies where the goods were
directly shipped by our vendor to our customer under a bill-to-ship-to arrangement.

In regards to the said Notice, we submit as under:

1. M/s ABC Ltd (hereinafter referred to as 'the company' or 'We') are engaged in
the business of << Nature of Business>>.

2. That the company has operations in <<number of states in which has

operations>> and is regular in filing periodical GST returns.

3. That your good-office has issued a SCN to deny the Input tax credit ('ITC') on
following goods claimed by our Delhi location in the month of April 2023 on the
pretext that these goods were not physically received at our GST registered
premises.

S. No Nature of Goods Invoice No and date Basic Amount GST

4. That the impugned SCN has denied the ITC on account of failure to fulfil one of
the mandatory conditions of actual receipt of goods stipulated under section 16
of the Central Goods and Services Tax ('CGST') Act.

5. The impugned SCN has alleged that the aforesaid goods were supplied by our
vendor based in Rajasthan and delivered to our customer in Punjab and
therefore the company is not eligible to claim ITC in Delhi as the goods were
not received in Delhi.
6. In this regard, we would like to reproduce relevant extracts of section 16 of the
Central Goods and Services Tax ('CGST') Act which deals with eligibility of ITC
and conditions for claiming the ITC:

Section 16 (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;

(aa) the details of the invoice or debit note referred to in clause (a) has been
furnished by the supplier in the statement of outward supplies and such
details have been communicated to the recipient of such invoice or debit
note in the manner specified under section 37;]

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;

……….

7. We would also like to reproduce the relevant extracts of section 10 of the

Integrated Goods and Services Tax. 2017 ('IGST') Act which deals with the
determination of place of supply of goods other than supply of good imported
into, or exported from India:

Section 10. (1) The place of supply of goods, other than supply of goods
imported into, or exported from India, shall be as under:

……….

(b) where the goods are delivered by the supplier to a recipient or any other
person on the direction of a third person, whether acting as an agent or
 otherwise, before or during movement of goods, either by way of transfer of
documents of title to the goods or otherwise, it shall be deemed that the said
third person has received the goods and the place of supply of such goods
shall be the principal place of business of such person;

………

[Emphasis supplied]

8. In light of the above provisions of law (Section 16(2) of the CGST Act, 2017
read with the explanation), the company acknowledges that receipt of goods is
one of the mandatory conditions for claiming ITC. However, in case of bill-to-
ship-to arrangement where the goods are supplied by the vendor directly to a
location as directed by the registered person, the registered person shall deem
to have received the goods on the strength of the invoice.

9. That in the facts of the present case, the company has rightly availed the ITC on
aforementioned invoices on the strength of the invoice issued by its vendors.

10. The company places reliance on the advance ruling issued by the State of
Rajasthan in the matter of Re. Umax Packaging [(2018) 100 taxmann.com 398]
wherein it was held that Umax Packaging is eligible to claim ITC of IGST paid
under bill-to-ship-to model in terms of the provisions contained under Section
16.

11. Given the above facts, analysis and jurisprudence, we submit before your
goodself that in view of the deeming fiction created in law vide the explanation
to section 16(2) of the CGST Act, the company has rightly availed the ITC of
the IGST paid on the aforementioned invoices.

Prayer

In view of the above submissions, the company most respectfully prays that:

1. It may be pleased to set aside the Impugned SCN and allow the company with
all consequential relief in full

2. Allow the company to add, alter, amend and/or rescind any of the above
submissions before or at the time of hearing and to refer and rely upon any
case laws as and when produced

3. Grant a personal hearing; and

4. Pass such order as may be deemed fit and proper in the facts and
circumstances of the case.

Thanking You,

Yours faithfully,
For M/s <NAME OF THE COMPANY>

<NAME OF THE AUTHORISED SIGNATORY>

(DESIGNATION)