No denial of ITC merely because the supplier failed to file returns and pay taxes

By: Admin
May 18, 2024
Categories: Important Pronouncements
4 Min Read

The Hon’ble Uttarakhand High Court in Subhash Singh v. Deputy Commissioner, SGST [Special Appeal No. 100 of 2024 dated May 03, 2024] has modified the assessment order passed earlier against the purchasing dealer on condition of depositing 10% of the amount demanded and further observed that proceedings under Section 74 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) should not ideally be instituted against the purchasing dealer for availing the benefit of ITC since the same has not been availed in a fraudulent manner.

Facts:

Subhash Singh (“the Appellant”) is engaged in the retail and wholesale business of iron scrap and waste with its principal place of business, District Udham Singh Nagar, Uttarakhand.

The Appellant had purchased goods with proper invoices and made proper payments through banking channels along with applicable GST. The details of the invoices and the payment of GST have been recorded in the Appellant’s books of accounts.

The supplier of the Appellant, “M/s Dev Bhoomi Spat”, had received GST from the Appellant when they had supplied their goods to the Appellant’s company, and the Appellant, in this backdrop, had rightly availed the input tax credit for the tax period April 2021 to March 2022.

The Appellant contended that proceedings under Section 74 of the CGST Act, cannot be initiated against the Appellant for availing the benefit of ITC in a fraudulent manner since the Appellant had paid GST, and it was reflected in invoices and E-way bills. If the Appellant’s suppliers committed a default, can the Appellant be liable for the consequences of denying the ITC.

The Respondent (Revenue), vide intimation dated January 30, 2023 raised the demand of Rs. 79,41,598/ -, which was later reduced to Rs. 46,84,278/ – in the Show Cause Notice dated March 17, 2023, and further reduced to Rs. 19,47,801/ – in the order dated June 22, 2023 (“the Impugned Order”).

Issue:

Whether ITC can be denied to the Appellant for failure on the part of the supplier to file returns and pay taxes?

Held:

The Hon’ble Uttarakhand High Court in Special Appeal No.100 of 2024 dated May 03, 2024, held as under:

Held that keeping in view the provisions of Section 107(6)(d) of the Uttarakhand Goods and Services Tax Act 2017 (“the Uttarakhand GST Act”), the Impugned Order is modified since the appellant has produced all the invoices from the suppliers.
Further held that it was the duty of the supplier to file their returns, which they have not done. Therefore, the order is being modified that the appellant will deposit 10% of the amount, which is being demanded.