Department to check supplier for tax not been remitted to the State exchequer

by Mr. Parveen Mahajan

In the case of M/S Loknath Construction private limited the Calcutta HC held that if the authority has admitted the fact that the recipient-appellant has made payment of the tax to the supplier against the transaction and if it is a case of the department that such tax has not been remitted to the State exchequer, the elementary principle to be adopted is to cause enquiry with the supplier and without doing so to penalise the appellant would be arbitrary, illegal and without jurisdiction – the impugned show cause notice and orders are set aside with a direction to the authorities to first proceed against the supplier and only under exceptional circumstances as clarified in the press release issued by the CBIC proceedings can be initiated against the appellant – the writ petition is allowed.