The Hon’ble Uttarakhand High Court in Subhash Singh v. Deputy Commissioner, SGST [Special Appeal No. 100 of 2024 dated May 03, 2024] has modified the assessment order passed earlier against the purchasing dealer on condition of depositing 10% of the amount demanded and further observed that proceedings under Section 74 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) should not ideally be instituted against the purchasing dealer for availing the benefit of ITC since the same has not been availed in a fraudulent manner.
Facts:
Subhash Singh (“the Appellant”) is engaged in the retail and wholesale business of iron scrap and waste with its principal place of business at District Udham Singh Nagar, Uttarakhand.
The Appellant had purchased goods with proper invoices and made proper payments through banking channels along with applicable GST. The details of the invoices and the payment of GST have been recorded in the Appellant’s books of accounts.
The supplier of the Appellant, “M/s Dev Bhoomi Spat”, had received GST from the Appellant when they had supplied their goods to the Appellant’s company, and the Appellant, in this backdrop, had rightly availed the input tax credit for the tax period April 2021 to March 2022.
The Appellant contended that proceedings under Section 74 of the CGST Act, cannot be initiated against the Appellant for availing the benefit of ITC in a fraudulent manner since the Appellant had paid GST, and it was reflected in invoices and E-way bills. If the Appellant’s suppliers committed a default, can the Appellant be liable for the consequences of denying the ITC.
The Respondent (Revenue), vide intimation dated January 30, 2023 raised the demand of Rs. 79,41,598/ -, which was later reduced to Rs. 46,84,278/ – in the Show Cause Notice dated March 17, 2023, and further reduced to Rs. 19,47,801/ – in the order dated June 22, 2023 (“the Impugned Order”).
Issue:
Whether ITC can be denied to the Appellant for failure on the part of the supplier to file returns and pay taxes?
Held:
The Hon’ble Uttarakhand High Court in Special Appeal No.100 of 2024dated May 03, 2024, held as under:
- Held that keeping in view the provisions of Section 107(6)(d) of the Uttarakhand Goods and Services Tax Act 2017 (“the Uttarakhand GST Act”), the Impugned Order is modified since the appellant has produced all the invoices from the suppliers.
- Further held that it was the duty of the supplier to file their returns, which they have not done. Therefore, the order is being modified that the appellant will deposit 10% of the amount, which is being demanded.
Our Comments:
The Hon’ble Uttarakhand High Court in Vinod Kumar v. Commissioner Uttarakhand State GST and others [Special Appeal No. 123 of 2022 dated June 20, 2022] has held that per the observation of the Hon’ble Supreme Court in Radha Krishan Industries v. State of Himachal Pradesh and others, (2021) [6 Supreme Court Cases 771], since the Commissioner is not an adjudicating authority, hence an appeal will not lie against the orders passed by him under Section 107 of the Uttarakhand Act which shall also be applicable to any orders passed by the Assistant Commissioner, be it attachment of property or cancellation of GST registration number, given the fact that the office of the Assistant Commissioner acts under the aegis and control of the Commissioner, and nowhere in the Uttarakhand Act, it is provided that he shall act independently to the duties assigned to him by the Commissioner. Readers must note that the matter is still being heard on its merits and is currently undecided.
It must also be noted that there is a peculiarity in the present judgment passed by the Hon’ble Uttarakhand High Court in the sense that the Appellant has been asked to deposit 10% of the amount demanded. However, the appeal has been disposed of, which begs the question as to what remedy the Appellant has received in this regard, as the High Court is silent on the relief relating to the eligibility of ITC by the buyer.
Additionally, Section 107(6)(d) does not exist in the Uttarakhand GST Act. It is opined that Section 107(6)(b) has been incorrectly stated as Section 107(6)(d). Section 107(6)(b) has been reproduced as follows –
“No appeal shall be filed under sub-section (1), unless the appellant has paid–
(b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order, in relation to which the appeal has been filed.”
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