GST Proceedings on Fraudulent ITC Barred against Purchaser for Supplier's Tax Non-Payment: Uttarakhand HC [Read Order]

In a recent case, the High Court of Uttarakhand has held that proceedings under the Goods and Service Tax ( GST ) Act, 2017 cannot be initiated against the receiver of benefits on fraudulent Input Tax Credit ( ITC ) while the supplier failed to pay tax. 

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 the GST have been recorded in his 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. He had paid GST and it was reflected in invoices and E-way bills. If the appellant’s suppliers committed a default, can the purchasing dealer be made to bear the consequences of denying the ITC. 

The short question for consideration is whether the appellant had purchased the goods from the suppliers through proper invoices, and has made proper payments through the banking channel along with applicable GST. If the suppliers have not filed their returns, then proceedings under section 74 of the Goods and Service Tax, 2017, cannot be initiated against the appellant for fraudulently availing the benefit of ITC.

In view of the provisions of section 107 (6) (d) of the Uttarakhand Goods and Services Tax Act 2017, the division bench of Chief Justice Ms Ritu Bahri And Justice Rakesh Thapilyal modified the order of the appeal that since the appellant has produced all the invoices from the suppliers, and it was the duty of the suppliers to further file their returns, which they have not done, the order is being modified that appellant will deposit 10% of the amount, which is being demanded by the respondents. 

Mr. Rohit Arora appeared for the petitioner and Ms. Puja Banga appeared for the respondent.

To Read the full text of the Order CLICK HERE

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