Arjuna (Fictional Character): Krishna, a welcome judgment has come from Madras High Court in favor of Buyer under GST. Let’s discuss it.

Krishna (Fictional Character): Arjuna, Madras High Court in the case of D.Y. Beathel Enterprises has recently given some relief to the recipient of goods from the reversal of ITC when no action was taken by the GST department against the defaulting Seller who has not paid the tax collected from the recipient.

Arjuna (Fictional Character): What are the facts of the case?

Krishna ( Fictional Character):  D.Y.Beathel Enterprises (Buyer) has purchased goods from the Seller Charles and his wife Firms. The buyer has paid all the money of invoices along with tax to the seller and availed ITC on it as per section 16. However, the department ordered for reversed ITC and ordered the recovery of the sum from the Buyer. Thus, the buyer went to High Court for relief from the recovery and prayed for 1st action to be taken against the seller and then against the Buyer as there is no fault of Buyer in this case and department action is wrong.

Arjuna (Fictional Character): What was the stand of the Department?

Krishna ( Fictional Character):  Department has presented that, they have to verify the seller, but the movement of goods is not verified, hence the ITC of the buyer should be reversed. Department’s view was that they can recover dues for Seller or Buyer as the case may be, to safeguard the interest of revenue.

Arjuna (Fictional Character): What is the judgment of Hon. High Court?

Krishna ( Fictional Character):  Hon. High Court, after verification of all facts and submission, concluded that the action against the seller should be taken first for the recovery of tax, then at last action against the buyer should be taken. Further Seller was also registered under the same GST jurisdiction, but what action was taken for recovery was not placed in front of the Court. Further only in few instances like Seller is absconding, Business is closed, or no assets are left for recovery of the seller, in such circumstances actions against the buyer may be done as per the departments circular. Thus, the case was remanded back for proper action and recovery against the seller.

Arjuna (Fictional Character):  So, what is the learning from the above?

Krishna (Fictional Character): Genuine Buyer can take the benefit from the above case if the facts of the case are the same. Further such type of action by the department against the Genuine buyer will not be justified. The seller should be punished first for his wrong deeds. Once all the course of recovery from the seller ceases, then the buyer may be asked to reverse the ITC. However current GST law should be more clearer, and the actions of the department may be in the line of judgment to safeguard the interest of the genuine buyer and revenue as well.

Author Bio

Qualification: CA in Practice
Company: R.B. Sharma and Co
Location: Aurangabad, Maharashtra, India
Member Since: 27 Jan 2018 | Total Posts: 433
1. Central Council Member of ICAI. 2. Vice-Chairman of WIRC of ICAI for the period 2015-2021. 3. Youngest Chairman of Aurangabad Branch of WIRC of ICAI in 2002. 4. Author of Popular Tax articles series based on Krishna and Arjuna conversation i.e “KARNEETI” published in Lokmat on every View Full Profile

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February 2024