Hon’ble Patna High Court (‘HC’) in the case of M/s Aastha Enterprises “the petitioner” has upheld the denial of Input Tax Credit (ITC) to petitioner purchaser on account of non-payment of GST by supplier to Government invoking Section 16(2)(c) of GST Act. Captioned judgement has been analyzed in this update.
1. FACTS OF THE CASE
2. CONTENTION OF THE APPLICANT
3. OBSERVATION AND DECISION BY HC
Observations of HC
Decision of Hon’ble HC
1. Our comments
This is a contrary ruling from Hon’ble Patna High Court on burning issue of reversal of ITC from purchaser on account of default in deposition by supplier invoking Section 16(2)(c) of GST Act. Earlier, we had rulings from Hon’ble Madras HC in D.Y. Beathel (supra) and Hon’ble Calcutta HC in the case of M/s Suncraft Energy Private Limited wherein it has been ruled that department need to first proceed against erring supplier provided the purchaser & supplier are not in collusion with each other.
CBIC also in Press release dated 4th May 2018 has clarified that there shall not be any automatic reversal of input tax credit from buyer on non-payment of tax by the seller. In case of default in payment of tax by the seller, recovery shall be made from the seller, however, reversal of credit from buyer shall also be an option available with revenue authorities to address exceptional situations like missing dealer, closure of business by supplier or supplier not having adequate assets etc.
It appears that above-mentioned CBIC circular and differentiation in treatment between bona-fide purchaser and cases of collusion between purchaser & supplier as ruled by Hon’ble Delhi HC in Arise India Limited have not been put forward in this particular matter.
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