Burden of Purchaser is Limited to verify GST registration on GST Portal and not expected to Speak about Suppliers' manner of Obtaining Registration: Andhra Pradesh HC [Read Order]

In a recent ruling, the Andhra Pradesh High Court (HC) has stated that the obligation or duty of the buyer is confined to proving that they genuinely acquired goods from the seller in exchange for valuable payment. This can be accomplished by confirming the Goods and Services Tax (GST) Registration through the GST portal.

Further, the bench of Justice U. Durga Prasad Rao and Justice Venkata Jyothirmai Pratapa   stated that the buyer has to establish the mode of payment of consideration and the mode of receiving of goods from the seller through authenticated documents.

The petitioner, M/s. Arhaan Ferrous and Non-Ferrous Solutions Pvt. Ltd. is a trader in iron scrap under a valid registered GST. The Petitioner purchased the iron scrap from M/s. K.S. Enterprises (“the Supplier '' - 4th Respondent) located in Vijaywada and further sold the same to M/s Radha Smelters Private Limited (''the Buyer'') located in Sankarampet under valid invoice number. 

The GST Dept (1st Respondent), while conducting check of vehicles in Vijayawada found the lorries of the petitioners transporting iron scrap covered by Bill and E-way Bill, which on verification revealed that 4th respondent was transporting iron scrap from Vijayawada destined to be delivered to M/s Radha Smelters Pvt Ltd., Sankarampet, Medak District, Telangana State.

It was noticed that the 4th respondent without having any place of business in Vijayawada dispatched goods therefrom. The consignment was not accompanied by the purchase voucher/invoice and payment of consideration. Hence the proper officer recorded the statement of the drivers in Form GST 01.

Since the goods are moved in violation of section 113 of Andhra Pradesh GST Act, notice of confiscation in Form GST MOV-10 was issued proposing to confiscate the goods and conveyance. Subsequently two reminders were issued to the 4th respondent. However, the seller remained silent.

The First respondent claimed that the tax invoice and e-Way bill raised by the 4th respondents implied that he is the owner of the goods. Also, the 1st Petitioner failed to establish the ownership of goods under dispute but submitted a letter without signature claiming ownership of the goods. Due to this, the respondent felt doubt in the existence of the First Petitioner too.

It was also contended that since the petitioners failed to establish the ownership of goods and genuineness of the purchases allegedly made from the non-existing dealer, it is not obligatory on the part of the proper officer to issue notice to the petitioners.

Conversely, the petitioner contended that at the time of interception of the vehicle for check up, the 1st petitioner was the owner of the goods-cum-seller and M/s. Radha Smelters Private Limited is the buyer and the transaction is covered by valid invoice and waybill and those documents were accompanying the goods and therefore, if at all the 1st respondent suspected the genuineness of the documents, he ought to have initiated proceedings against the 1st petitioner.

The petitioner claimed that the 1st respondent deliberately ignored the documents produced at the time of check which shows the source of goods and issued proceedings in the name of 4th respondent.

The bench, taking views from the Section 129 and 130 of the Central Goods and Services Tax Act (CGST Act), 2017, observed that though the 1st respondent may initiate proceedings against the 4th respondent under Section 130 of the CGST Act in view of his absence in the given address and not holding any business premises at Vijayawada, however, he cannot confiscate the goods of the 1st petitioner merely on the ground that the 1st petitioner happen to purchase goods from the 4th respondent.

The High Court mentioned that apart from the verification of the credentials through GST port which the buyer is not aware of, it is not expected to speak up about the business activities of the supplier and also whether he obtained GST registration by producing fake documents. In essence, the petitioners have to establish their own credentials but not the 4th respondent i..e, the supplier.

The bench held that the 1st respondent is not correct in roping the petitioners in the proceedings initiated against the 4th respondent without initiating independent proceedings under Section 129 of CGST/APGST Act against the petitioners.

However, as the 1st petitioner claimed to have purchased goods from the 4th respondent whose physical existence in the given address is highly doubtful as per the enquiry conducted by the Joint Commissioner, the 1st petitioner as observed, owes a responsibility to prove the genuineness of the transactions between him and the 4th respondent.

Therefore, the bench instructed that the 1st respondent can initiate proceedings under Section 129 of CGST/APGST Act against the petitioners and conduct enquiry by giving opportunity to the petitioners to establish their case.

Thus, the writ petitions were disposed by the High Court giving liberty to the 1st respondent to initiate proceedings against the petitioners under Section 129 of CGST/APGST Act, 2017 within two weeks from the date of receipt of a copy of this order and conduct enquiry by giving an opportunity of hearing to the petitioners and pass appropriate orders in accordance with governing law and rules.

Further stated that, in the meanwhile, the 1st respondent shall release the detained goods in favour of 1st petitioner on his deposit of 25% of their value and executing personal bond for the balance and he shall also release the vehicles in favour of the 2nd petitioner (the transporter engaged by the 1st petitioner) in the respective writ petitions on their executing personal security bonds for the value of the vehicles as determined by concerned Road Transport Authority.

To Read the full text of the Order CLICK HERE

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