‘Every Person’ in S.76 of JGST Act Covers Unregistered Suppliers: Jharkhand HC Directs Action for Failure to Deposit Collected Tax [Read Order]

In a recent ruling clarifying the scope of liability under the Jharkhand Goods and Services Tax Act ( JGST ), 2017, the Jharkhand High Court has held that the expression “every person” under Section 76 includes even those suppliers who may be unregistered or registered under Central GST jurisdiction.

The Court directed the State GST authorities to initiate recovery proceedings against a supplier who collected tax but failed to deposit the same with the government, thereby depriving the recipient of Input Tax Credit (ITC) to the petitioner/assessee.

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The case arose when M/s R.K. Transport & Constructions Ltd., a GST-registered entity engaged in coal transportation, approached the High Court with allegations that their supplier, M.B. Enterprises (Respondent No. 6), raised invoices for hiring commercial motor vehicles amounting to ₹73.34 lakh for the period October 2020 to March 2021, which included ₹11.18 lakh as CGST and SGST. While the petitioner paid the full invoice amounts, including the taxes, these did not reflect in its GSTR-2A due to the supplier’s failure to file GSTR-1 returns.

The GST department claimed that since the supplier fell under the Central GST jurisdiction, they lacked the power to initiate action.

Rejecting this contention, the Court held that Section 76 of the JGST Act casts an obligation on “every person” who collects tax to remit it to the government. Failure to do so invites recovery proceedings along with a penalty equal to the amount collected but not paid.

The Bench, comprising Chief Justice M.S. Ramachandra Rao and Justice Rajesh Shankar, firmly held that the State authorities could not shirk their responsibility on the ground of jurisdiction, as the statutory provision does not exempt unregistered or cross-jurisdictional suppliers from its ambit. The Court observed that inaction by the department had caused substantial financial loss to the petitioner, who was prevented from claiming lawful ITC.

The Court also rejected the supplier’s/respondent 6’s defence that it was not liable to pay GST or that res judicata applied due to a prior petition by the petitioner. The earlier writ petition had merely directed the petitioner to make fresh representation and had not adjudicated the matter on merits. The supplier’s own invoices contained CGST and JGST components, clearly contradicting its denial of liability.

Consequently, the High Court allowed the writ petition and directed the State authorities to initiate proceedings against the supplier under Section 76 within eight weeks. It also imposed a cost of ₹1,00,000 on the supplier, payable to the petitioner, for illegally withholding government dues and denying the petitioner its rightful ITC.

Ms. Amrita Sinha, Advocate and Mr. Akash Bhushan, Advocate appeared for the petitioner and Mr. Ashok Kumar Yadav, Sr. S.C.-I Mr. Bhola Nath Rajak, Advocate appeared for the respondents.

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