Introduction: This article delves into the crucial case of Deputy Assistant Commissioner-1 (ST) v. Arhaan Ferrous and Non Ferrous Solutions (P.) Ltd. [Petitions for Special Leave to Appeal (C) No (S). 24711-2474 of 2023 dated November 6, 2023], heard by the Supreme Court of India. The verdict emphasizes the purchaser’s responsibility to verify the GST registration of the seller on the GST portal.
The Hon’ble Supreme Court in above case held that they are not inclined to interfere in the matter where the Hon’ble Andhra Pradesh High Court held that the assessee was responsible only to the extent of establishing that the bonafide purchased goods from the Supplier for valuable consideration after verifying the GST registration of the said Supplier on the GST portal.
Arhaan Ferrous and Non-Ferrous Solutions Pvt. Ltd. (“the Respondent”) is engaged in the trading of iron scrap. Mr. T. Srinivasulu (“the Transporter”) is the owner of the vehicle in which the Respondent transports iron scrap. The Respondent purchased the iron scrap (“the Goods”) from M/s. K.S. Enterprises (“the Supplier”) located in Vijaywada and further sold the same to M/s. Radha Smelters Private Limited (“the Buyer”) located in Sankarampet under valid invoice number. The Respondent engaged the transporter for transporting the Goods from Vijayawada to Sankarampet accompanied with valid documents such as invoice, E-way bill, weighment slip etc.
The Revenue Department (“the Petitioner”) detained the Goods in transit on the allegation that the Supplier had no place of business at Vijayawada and initiated the proceedings against the Supplier under Section 130 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).
The Respondent contended that the Petitioner had deliberately ignored the documents produced at the time of check which showed that the Respondent was the owner of the Goods. As per Section 129 of the CGST Act, an action can be initiated against the person who is transporting goods, which in the present case is the Respondent. Instead of issuing proceedings in the name of the Respondent, the Petitioner issued notice against the Supplier who had no interest in the matter after selling the consignment for valuable consideration to the Respondent.
The Hon’ble Andhra Pradesh High Court held that, the proceedings for detention of the Goods can be initiated while the Goods are in transit in contravention of provisions of the CGST Act. In the instant case, the Petitioner may initiate proceedings against the Supplier under Section 130 of the CGST Act in view of his absence at the given address and not holding any business premises at the provided address. However, the Petitioner cannot confiscate the Goods of the Respondent merely on the grounds that the Respondent happen to purchase goods from the said Supplier. Further, the claim made by the Respondent regarding purchase of goods is highly doubtful as the physical existence of the said Supplier is questioned. Thus, the Petitioner can initiate proceedings under Section 129 of the CGST Act against the Respondent and conduct an enquiry by giving opportunity to the Respondent to establish their case.
Further held that, the Petitioner will release the detained goods in favour of the Respondent on deposit of 25% of the value of goods and execute a bond for the balance and shall also release the vehicles in favour of the transporter. Lastly, the Respondent’s responsibility will be limited to the extent of establishing that he bonafidely purchased goods from the Supplier for valuable consideration after verifying the GST registration of the said Supplier on the GST portal.
Hence, aggrieved by the Order passed by the Hon’ble High Court, Special Leave Petition was filed by the Petitioner.
The Supreme Court of India in case of Special Leave to Appeal (C) No (S). 24711-2474 of 2023 dated November 6, 2023, held that, the Apex Court was not inclined to interfere in the matter resulting in dismissal of SLP. Hence, the matter was disposed of.
Conclusion: In conclusion, the Supreme Court’s decision in Deputy Assistant Commissioner vs. Arhaan Ferrous underscores the significance of purchasers verifying the GST registration of their sellers on the GST portal. The responsibility to establish bona fide purchases lies with the buyer, and this case sets a precedent for such situations. The article has provided an insightful analysis of the case, emphasizing the need for diligence in compliance with GST regulations.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Having heard learned counsel for the petitioner(s), we are not inclined to interfere in the matter. The Special Leave Petitions are hence dismissed.
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