No GST Act Proceedings Against Purchaser for Supplier’s Non-Deposit: Uttarakhand HC

Subhash Singh Vs Deputy Commissioner (Uttarakhand High Court)

A recent judgment by the Uttarakhand High Court in the case of Subhash Singh vs. Deputy Commissioner sheds light on the applicability of Section 74 of the Goods and Services Tax (GST) Act. The court addressed whether purchasers should be held accountable for their suppliers’ failure to deposit taxes.

The appellant, engaged in the iron scrap business, had purchased goods with proper invoices and paid applicable GST. However, the supplier failed to deposit taxes, leading to a demand notice against the appellant. The crux of the matter was whether the appellant could be penalized for the supplier’s non-compliance.

The court examined Section 74 of the GST Act and emphasized that if a purchaser has followed due diligence, including proper invoicing and payment of GST, they cannot be held responsible for the supplier’s defaults. Despite the supplier’s non-payment, the appellant had availed input tax credit in good faith.

Considering the appellant’s submission and provisions under Uttarakhand GST Act, the court modified the order, stating that since the appellant had produced all invoices and it was the supplier’s obligation to file returns, the appellant’s liability was limited to depositing 10% of the demanded amount.

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