Purchaser Cannot be Denied GST ITC For Supplier’s Non-Compliance: HC

The petitioner has challenged the order dated 24.06.2022 passed by the Additional Commissioner Grade-2 (Appeals), commercial Tax, Meerut/respondent no.1 for the period July, 2017 to March, 2018 and the order dated 22.10.2021 passed by the Deputy Commissioner, State Tax, Sector-4, Meerut/Respondent no.2 for the period July, 2017 to March, 2018.

Learned counsel for the petitioner submits that the petitioner is a registered supplier having GSTIN and is authorised user of the services of mobile recharge of M/s Bharti Airtel Ltd., Vibhuti Khand, Gomti Nagar, Lucknow, for the period of 2017-18. He submits that the petitioner uses services of recharged coupons from M/s Bharti Airtel Ltd., against 7 tax invoices amounting to Rs. 1,58,46,502/- wherein the petitioner claimed ITC of Rs. 28,52,370/-.

GST Department alleged that the input tax credit (ITC) was wrongly claimed because tax was not deposited by the supplier (M/s Bharti Airtel Ltd.) in the government treasury, invoking Section 16(2)(c) of the CGST Act.

Petitioner argued that all payments made through the banking channel, and he cannot control whether the supplier deposits tax or files returns. Petitioner relied on the Supreme Court ruling in Suncraft Energy Pvt. Ltd. (2023) and the Madras HC ruling in D.Y. Beathel Enterprises, which held that buyers shouldn’t be penalised for the seller’s defaults.

The Hon’ble Apex Court in the case of Suncraft Energy (supra) had occasion to consider that the party who has paid the tax on invoices being raised and non-discharge of duties by the counterpart of the seller, the Court was pleased to remand the matter for making a due inquiry from the supplier.

Similarly, the Madras High Court in the case of D.Y. Beathel Enterprises Vs. State Tax Officer (Data Cell), Tirunelveli, 2022 (58) G.S.T.L. 269 (Mad.) has taken a view that in the absence of non-performance of duty by the supplier, action must be taken against the supplier simultaneously, and the purchaser alone shall not be suffered.

The Court, relying on these two judgements, took the Petitioner’s stand and allowed that writ petition.