In a historic decision, a Division Bench of the Uttarakhand High Court has held that no proceedings shall be initiated against purchaser of goods under Section 74 of Goods and Services Tax Act for non-deposit of Goods and Services Tax ( GST ) by supplier.
Singh, engaged in the iron scrap and waste business, had purchased goods with proper invoices and paid GST through banking channels. He claimed ITC for the tax period April 2021 to March 2022 based on these invoices. However, the SGST department denied the ITC on the grounds that Singh’s supplier had not filed their GST returns.
It was noted that, “the invoices of sale made to the suppliers are with the appellant, and on the basis of the invoices the payments were made.”
“the appellant has produced all the invoices from the suppliers, and it was the duty of the suppliers to further file their returns”, the bench further noted.
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The High Court bench of Chief Justice Ritu Bahri and Justice Rakesh Thapilyal held that the petitioner had fulfilled all the requirements to claim ITC.
He had proper invoices, made payments through banking channels with applicable GST, and maintained proper records.
The Court emphasized that the supplier’s failure to file returns should not penalize the purchasing dealer who acted in good faith. Businesses should maintain proper records of invoices and GST payments. Following due diligence when purchasing goods can help avoid future disputes.
The Uttarakhand Court directed the petitioner to deposit 10% of the initially demanded amount by the State Goods and Services Tax department. It was also added that the department can still pursue action against M/s Dev Bhoomi Spat, the supplier, for non-filing of returns.
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