TaxTMI 
TaxTMI 
TaxTMI 
The issue arising out of section 16 (2) (c) of the CGST Act pertaining to demand of reversal of ITC along with interest as well as penalty for supplier’s default to make payment of GST to the Government is effective since 01/06/2017 itself and the GST Department is highly aggressive on implementation of this particular issue.
It may be noted that even though there are one or two cases available in favor of the department of revenue at the initial stages, those cases may be relating to cancellation of registration of the supplier even before the supply date. However, when the supplier’s registration is active and the records of the receiver very clearly establish that all applicable dues of the supplier along with GST is paid to the supplier, Government must initiate action only against the seller and only when such actions fail and the Government is not in a position to recover such tax, the receiver is in trouble.
However, as it is easy to collect the GST from the receiver, Department makes an attempt only on the receiver as a first step. Many taxpayers, left with no option to fight as First Appellate Authority is also confirming the OIO almost in all cases and as there is no GSTAT in place today, pay the taxes with interest and penalty. However, this is not the correct legal stand as confirmed by the Hon’ble Supreme Court in the case of THE ASSISTANT COMMISSIONER OF STATE TAX, BALLYGUNJGE CHARGE & ORS. VERSUS SUNCRAFT ENERGY PRIVATE LIMITED & ORS - 2023 (12) TMI 739 - SC ORDER.
There are several cases before various high courts and decisions are mostly in favor of the taxpayer except in cases where the credits are availed fraudulently or payments not made to supplier or supplier registration cancelled etc. Thus when it is established that consideration along with GST is paid to supplier as per records of receiver, ITC should not be denied.
Recently, on 30/05/2025, Allahabad High Court has held accordingly in the case M/S R.T. INFOTECH VERSUS ADDITIONAL COMMISSIONER GRADE 2 AND 2 OTHERS - 2025 (6) TMI 116 - ALLAHABAD HIGH COURT. Proper officer confirmed the demand on 22/10/2021 for the period pertaining from July 2017 till March 2018. The First appellate authority also dismissed the appeal on 24/06/2022. As the receiver had already paid all dues including applicable taxes to the supplier which are clearly established from the bank accounts of the receiver, left with no option, approached the jurisdictional high court for remedy.
The high court has dealt this issue in depth and refereed to the Supreme Court order in the matter of Suncraft Energy. Reference was also made to the high court decision reported in M/S. D.Y. BEATHEL ENTERPRISES VERSUS THE STATE TAX OFFICER (DATA CELL), (INVESTIGATION WING) COMMERCIAL TAX BUILDINGS, TIRUNELVELI. - 2021 (3) TMI 1020 - MADRAS HIGH COURT and took the stand that both OIO as well as OIA are liable to be set aside and the matter requires re examination.
The operative portion of the order is on para 17 which reads as 17. The writ petition is allowed. The matter is remanded to the respondent concerned for deciding afresh
by passing a reasoned and speaking order, after hearing all the stakeholder, within a period of two months from the date of production of certified copy of this order.
To conclude, taxpayers who face similar issues may fight the cases more vehemently as even the Apex Court is in their favor. The departmental officers handling issues on 16 (2) (c) may pass orders assuming their role as a Quasi Judicial OFFICER so as to ensure that orders passed by them are not being quashed by a higher court at a later date.