Ecom Gill: the judgment quoted in every ITC notice, and what it does not say

The Supreme Court told taxpayers what they must prove. Departments have been reading it as permission to disbelieve everything.

Why a VAT judgment sits in your GST notice

Ecom Gill was decided under the Karnataka Value Added Tax Act. The provision considered was Section 70, which places the burden of proving a claim on the person making it. The GST equivalent is Section 155 of the CGST Act, drafted to the same effect.

Because the burden provision is materially identical, the reasoning travels. The department is entitled to cite it. The error lies in what is extracted from it.

The Court was dealing with claims where dealers produced tax invoices and cheque payments and nothing more, and where the selling dealers were either non existent or had not accounted for the transactions. On those facts the Court held that the claim fails.

What the Court laid down

The claimant must establish the actual physical movement of goods and the genuineness of the transaction. Not the paper. The event.

The Court specified the kind of material it had in mind: the name and address of the selling dealer, details of the vehicle that delivered the goods, payment of freight charges, acknowledgement of taking delivery, tax invoices and payment particulars. The list is illustrative of a standard, not a closed checklist.

The Court also rejected the proposition that the burden shifts to the department merely because the dealer produced invoices. It shifts only when the claimant has led evidence capable of establishing the transaction.

Crucially, the Court did not hold that a genuine transaction becomes ineligible because the supplier defaulted in payment. That was not the question before it.

Reading Ecom Gill with Suncraft

The Calcutta High Court in Suncraft Energy Private Limited (2023) held that credit cannot be reversed in the hands of a buyer on a mere GSTR-2A mismatch, and that the authorities must first proceed against the supplier, acting against the recipient only in exceptional situations such as collusion or a missing dealer.

The two decisions answer different questions and stand together. Ecom Gill answers what must be proved. Suncraft answers whom the department must pursue once it is proved.

The taxpayer who loses in 2026 is the taxpayer who has invoices and bank statements and nothing else. The taxpayer who wins is the one who can show the truck, the gate entry, the stock ledger and the outward supply on which tax was paid.

The evidentiary file the judgment actually demands

Existence. Purchase order, tax invoice with a valid e-invoice reference number, e-way bill, transporter document, weighbridge slip, gate entry register, goods receipt note and quality inspection record. Each of these is generated by a different person at a different time, which is precisely why they persuade.

Consumption. Stock ledger movement, bill of material or production record, and the outward invoice into which the input was absorbed. A department is in an uncomfortable position when it alleges a fictitious purchase that produced a real sale on which it collected tax.

Diligence. A dated record of the supplier's registration status at the time of the transaction, the invoice appearing in GSTR-2B, payment through banking channels, and correspondence with the supplier once a mismatch surfaced.

For services the movement layer is replaced by deliverables: scope of work, timesheets, reports, approvals, correspondence and the output supply that consumed the service.

How to answer a notice built on Ecom Gill

Do not argue that the burden is on the department. It is not, and the argument surrenders credibility on the first page.

Discharge the burden and say so in terms. State the material relied on, index it, and invite the officer to record which item is disbelieved and why.

Then place the second limb. Once the transaction is established, the default of the supplier is a matter between the department and the supplier, and recovery from the recipient requires the exceptional circumstances the High Courts have identified.

Where the notice relies on a third party statement recorded during investigation, demand cross examination in writing. A denial of cross examination on a statement that forms the substratum of the demand is a natural justice ground that survives to the Tribunal.

Authorities relied on

What to do on Monday

1. Run a supplier wise reconciliation of GSTR-2B against books for every year still within limitation and flag suppliers whose GSTR-1 to GSTR-3B gap exposes you.

2. For flagged suppliers, assemble the three evidentiary layers now. Evidence assembled after a notice always reads as evidence assembled after a notice.

3. Institute a standing instruction that transport and delivery documents are scanned against the invoice at the time of receipt, not at the time of audit.

4. Insert a tax indemnity and a right to withhold the tax component until the invoice appears in your GSTR-2B into standard purchase terms.

5. Where a demand rests on a supplier's statement, apply in writing for cross examination before the adjudication closes.

Questions we are asked on this

Is Ecom Gill binding under GST when it was decided under VAT?

Its ratio on the burden of proof applies because Section 155 of the CGST Act is materially the same provision. What is not binding is the department's extension of it to cases where movement and consumption are established.

The officer says our documents are self serving. What then?

Ask him to record that finding item by item. Documents generated by third parties — transporters, weighbridges, banks, testing laboratories — are not self serving, and an order that dismisses them without reasons is vulnerable.

We buy through brokers and never meet the supplier. Are we exposed?

Materially, yes. Broker mediated purchases must be supported by transport and delivery evidence in your own possession, not the broker's assurance. Build the file at the time of the transaction.

Does an e-invoice reference number settle the question?

It settles that the invoice was reported on the portal. It says nothing about whether goods moved. Treat it as one layer of three.

Can the department demand evidence for transactions from 2017-18 today?

It can, within limitation, and Section 36 requires records to be retained for the prescribed period. The practical difficulty of producing old transport documents is real, which is why the reconciliation should be run before a notice arrives.

In this cluster

• Input tax credit under GST: the complete 2026 position
• Section 16(2)(c): can your ITC be denied because the supplier did not pay tax?
• Section 16(4) time limit for claiming ITC: what survives after the amnesty
• GSTR-2A and 2B mismatch notices: how to answer without conceding
• Blocked credits under Section 17(5): the clause by clause map
• Safari Retreats: what the Supreme Court decided on ITC for construction, and what Parliament then undid
• ITC on canteen, transport, insurance and other employee benefits
• ITC reversal under Rules 42 and 43: working the formula correctly
• Rule 37: ITC reversal when you do not pay your supplier within 180 days
• Rule 37A: reversal where your supplier did not file its GSTR-3B

GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.