Imagine this situation.
You buy goods from a registered GST supplier. You pay the invoice value including GST. You file your returns properly and claim Input Tax Credit (ITC). Months later, the department tells you:
“Your supplier never paid GST to the Government. Reverse the ITC, pay tax again with interest and penalty.”
Sounds unfair?
The Tripura High Court thought so too.
In a landmark ruling, the Court has held that a bona fide purchaser cannot be punished for the supplier’s failure to deposit GST, and has read down Section 16(2)(c) of the CGST Act, 2017 to protect genuine taxpayers.
What Went Wrong?
M/s Sahil Enterprises, a trader in rubber products, purchased goods from a registered supplier and paid GST of ₹1.11 crore along with the purchase price. Everything looked compliant on paper:
- Valid GST invoices were issued
- Supplier filed GSTR-1 showing outward supplies
- Purchaser availed ITC based on returns
However, during departmental investigation, it was found that the supplier filed NIL GSTR-3B returns and never paid the GST collected.
The department reacted by:
- Blocking Sahil Enterprises’ ITC
- Issuing a show cause notice under Section 73
- Confirming demand with interest and penalty
Left with no option, the taxpayer approached the High Court.
