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Action taken against buyer for reversal of ITC without taking any action against seller is arbitrary: High Court

Before directing the buyer to reverse the input tax credit and remit the same to the government, the GST Authorities ought to have taken action against the selling dealer and unless and until the authority is able to bring out the exceptional case where there has been collusion between the appellant and the selling dealer or where the selling dealer is missing or the selling dealer has closed down its business or the selling dealer does not have any assets and such other contingencies, straight away the authority was not justified in directing the appellant to reverse the input tax credit availed by them.

- High Court

Petitioner:

The appellant had challenged a show-cause notice issued by the GST Authorities on the ground that the notice has been issued without causing any verification from the supplier’s end and denying credit to the appellant.

In the said case the assessee had impugned the order of the assessing officer who reversed the Input Tax Credit availed by the assessee. In the said case the private respondent was the supplier of the assessee who provided supply of goods and services to the assessee who had made payment of tax to the private respondent at the time of effecting such purchase along with supply of goods/ services.

However, in some of the invoices of the said supplier were not reflected in the GSTR-2A of the assessee for the Financial Year 2017-18.

In the said case the assessing authority issued notices for recovery of ITC to which the assessee objected by stating that without conducting any enquiry of the supplier who was the private respondent of the said proceedings and without effecting any recovery from the supplier the Assessing Officer was not justified in proceeding against the assessee.

High Court:

The GST authority without resorting to any action against the selling dealer has ignored the tax invoices produced by the appellant as well as the bank statement to substantiate that they have paid the price for the goods and services rendered as well as the tax payable there on, the action of the authority has to be branded as arbitrarily.

Therefore, before directing the appellant to reverse the input tax credit and remit the same to the government, the authority ought to have taken action against the selling dealer and unless and until the authority  is able to bring out the exceptional case where there has been collusion between the appellant and the selling dealer or where the selling dealer is missing or the selling dealer has closed down its business or the selling dealer does not have any assets and such other contingencies, straight away the authority was not justified in directing the appellant to reverse the input tax credit availed by them. Therefore, we are of the view that the demand raised on the appellant is not sustainable.

The adjudicating authority without resorting to any action against the supplier who is the selling dealer, had ignored the tax invoices produced by the appellant as well as the certificates issue b.......
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TaxReply


May 15, 2024


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