Purchasers Not Liable for Supplier's Tax Defaults?Under?GST : Landmark Ruling of Uttarakhand HC

Facts:

1. Revenue issued an assessment order against Subhash Singh under Section 74 of the CGST Act, 2017 for allegedly availing ITC fraudulently.
2. Singh, in the iron scrap business, purchased goods with proper invoices and paid GST through banking channels.
3. Supplier failed to deposit taxes, leading to a demand notice against the Petitioner.

Issue:

Can ITC be denied to the petitioner if the supplier fails to file returns and pay taxes?

Judgement:

1. The court ruled that a compliant purchaser cannot be held liable for the supplier’s defaults.
2. The Petitioner had met all requirements; thus, proceedings under Section 74 could not be sustained against him.
3. The court modified the order, limiting Singh’s liability to depositing 10% of the demanded amount.

Our Comments:

1. This ruling reaffirms that bona fide purchasers should not be penalized for suppliers' non-compliance, protecting compliant businesses under GST.
2. The decision clarifies that tax payment responsibility lies with the supplier, provided the purchaser has acted in good faith.
3. It offers significant relief to businesses, ensuring they are not unduly burdened by others' defaults and upholds the integrity of the GST system.

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