Buyer GST Liability Judgment
M/S R.T. Infotech vs. Revenue [Writ Tax No. 1330 of 2022]
Background of the Case
The appellant, a registered dealer engaged in the business of mobile recharge, had availed ITC worth Rs. 28,52,370 on the basis of seven tax invoices issued by M/s Bharti Airtel Ltd. The appellant asserted that the applicable CGST and SGST components, each amounting to Rs. 14,26,185, were paid through banking channels (RTGS) to the supplier. However, during scrutiny, the tax department noticed discrepancies in the appellant’s return, primarily the non-reflection of these invoices in the GSTR-2A. A notice was issued in Form ASMT-10, and despite the appellant’s reply in ASMT-11 explaining the genuineness of transactions, the department proceeded to issue a show cause notice under Section 73 of the CGST Act. The proceedings culminated in an order directing recovery of the ITC, imposition of 10% penalty, and interest liability. The appellant’s appeal against this order was dismissed, prompting the writ petition before the Allahabad High Court.
Arguments by the Appellant
The appellant submitted they had fully complied with all legal requirements for availing ITC. The goods (recharge coupons) were purchased from a legitimate and recognized supplier, M/s Bharti Airtel Ltd., and the payment of tax on these invoices was made through official banking channels. It was submitted that the mismatch in GSTR-2A was not due to any failure or fraud on the part of the appellant but was attributable to the selling dealer’s non-compliance, over which the appellant had no control. The appellant contended that the department, instead of taking coercive action against the buyer, should have proceeded against the defaulting seller who had failed to deposit the tax with the government. The appellant maintained that it was not within its powers to compel the supplier to file returns or deposit the tax collected, and any recovery should be directed toward the erring seller.
Respondent’s Response
The Revenue defended the impugned orders by asserting that under Section 16(2)(c) of the CGST Act, ITC can be availed only if the tax charged in respect of the supply has actually been paid to the government. Since the tax claimed by the appellant did not reflect in GSTR-2A and was not deposited by the supplier, the reversal of ITC was justified. The respondent argued that the scheme of GST law places a statutory condition on the availability of ITC, which requires actual deposit of the tax amount. As such, in the absence of evidence that the supplier had remitted the tax, the authorities were well within their rights to deny the credit and recover the same along with penalty and interest. According to the department, the appellant’s failure to ensure that the tax reached the government treasury disentitled it from claiming credit, notwithstanding the fact that payment was made to the supplier.
Court Findings and Decision
The Allahabad High Court ruled in favor of the appellant and held that the purchasing dealer cannot be made to suffer due to the non-compliance of the supplier, particularly when the former has no statutory mechanism to enforce filing of returns or deposit of tax by the supplier. Citing the decisions in Suncraft Energy and D.Y. Beathel Enterprises, the Court reiterated that the burden of enforcement lies with the department, and action should be directed toward the defaulting seller rather than the compliant buyer. Accordingly, the Court quashed both the assessment and appellate orders and remanded the matter to the concerned authority for fresh adjudication after hearing all stakeholders. The authority has been directed to pass a reasoned and speaking order within two months of receiving a certified copy of the judgment.
Buyer GST Liability Judgment
To download official order, Click Here
“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship. The information on this site is not intended to be a substitute for professional advice.”