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Hon'ble Judges:

DR. S. MURALIDHAR
B.P. ROUTRAY
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P.k. Harichandan
COUNCIL
S.s. Padhy
S. Mishra

"Buyer registration cancelled as a preventive measure to prevent him from future fraud"- High Court set aside the order.

For fraud committed by selling dealer, GST Registration of purchasing dealer cannot be cancelled: High Court says

Court observed that reasoning in the order of the Appellate Authority is only that “the preventive measure has been taken by the LPO by cancellation of the registration of the appellate to prevent future fraud or to prevent from recurrence for such the regular claims of the ITC and that is the interest of the Government revenue”. Court also noted that, the cancellation of the Petitioner’s registration was for a very terse reason: “clarification submitted not satisfactory”.

Petitioner grounds:

It is submitted that on a collective reading of Section 16 of the GST Act with Rule 21 of the GST Rules, there is no provision that enables the cancellation of the registration of the purchasing dealer for any fraud committed by the selling dealer.

Secondly, he points out that the cancellation registration of the selling dealer took place long after the dates of the purchases made by the petitioner from the said dealer. He, therefore, submits that on the date of purchases took place, there was no way that the Petitioner would have known that at some future point in time, the registration of the selling dealer was going to be cancelled.

Reference to Delhi High Court ruling was also given wherein court observed that buyer cannot be put in jeopardy when he has done all that the law requires him to do and further that the purchasing dealer has no means to ascertain and secure compliance of the selling dealer.

Facts:

GST Authority issued SCN for cancellation of registration on the ground that: “you have claimed ITC of Rs. 2,04,650,06 against fake invoices issued by nonexistent supplier”.

A reply was sent by the Petitioner. It was pointed out by the Petitioner that purchases had been made from a dealer, who is registered with the GST Department, and ITC was being claimed on the basis of the tax invoices that fulfilled the requirement of law.

GST Authority called upon the Petitioner to pay the tax, interest and penalty amount aggregating to Rs. 3,48,066/- on the ground that the ‘ITC claimed was against fake invoices issued by nonexistent supplier’. A reply was sent by the Petitioner to authority asking for being provided with the material in possession of GST Authority.

Thereafter, authority cancelled the Petitioner’s registration with the remark “clarification submitted not satisfactory, hence cancelled.” Appeal of taxpayer is also rejected in this matter.

Revenue:

Mr. Padhy, learned ASC for the Department drew the attention of the Court to the reply filed to the present petition where it has been stated that when a field visit was undertaken to the address shown for the selling dealer, the premises were found to be occupied by some other person and not the selling dealer. From the said visits which were undertaken on 1st July 2019, a conclusion was drawn that the transactions entered into by the present Petitioner with the selling dealer in April and August 2018 were fake transactions.

Held by High Court:

The Court finds merit in the contention of petitioner that for the fraud committed by the selling dealer, which resulted in cancellation of a selling dealer&.......
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Author:

TaxReply


Jun 23, 2022


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