GST demand order set aside after authorities failed to follow precedent requiring action against sellers before buyers

The HC set aside a GST demand order dated August 21, 2023, where petitioners claimed input tax credit on IGST shown in invoices but the seller filed NIL returns. The court found that authorities violated established precedent requiring action against sellers before buyers, except in exceptional circumstances per CBIC press release. The petitioners were denied opportunity to present documents and contentions before the original authority. The court directed petitioners be given chance to approach authorities with all supporting documents and arguments regarding the demand.

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Issues involved:
The judgment involves challenges to an order passed by the Assistant Commissioner of State Tax regarding the refund of input tax credit under the GST Act for a specific period. The petitioners argue that they should not be held responsible for the seller's non-compliance with tax laws. The petitioners rely on invoices and bank statements to support their claim. The judgment also refers to a previous case where the reversal of input tax credit was contested due to discrepancies in the supplier's returns.

Details of the Judgment:

Issue 1: Impugned Order and Input Tax Credit Refund
The petitioners were directed to pay a sum under the GST Act for allegedly availing input tax credit without the Integrated Goods and Service Tax (IGST) being paid by the seller. The petitioners challenge the order, claiming that IGST was paid for each transaction as evidenced by invoices.

Issue 2: Jurisdiction and Compliance
The petitioners argue that the order is without jurisdiction and not in compliance with the statute and press releases of the Board. They assert that the alternative remedy of appeal does not prevent them from filing a writ petition.

Issue 3: Reliance on Invoices and Bank Statements
The petitioners rely on invoices showing IGST payments to the seller and bank statements confirming the transfer of the amount to the seller's account. Reference is made to a previous Division Bench decision in a similar matter.

Issue 4: Precedent and Statutory Appeal
A previous case where a similar writ petition was dismissed, directing the petitioners to pursue the statutory appeal route, is mentioned.

Issue 5: Reversal of Input Tax Credit
In a separate case, the reversal of input tax credit was contested due to discrepancies in the supplier's returns, leading to recovery notices issued to the appellant without proper enquiry against the supplier.

Issue 6: Authority's Decision
The Division Bench held that the authority cannot reverse input tax credit without taking action against the selling dealer, except in exceptional cases where the supplier is unable to remit the IGST amount.

Conclusion:
The judgment sets aside the impugned order and directs the authority to allow the petitioners to present all relevant documents and contentions. The authority is instructed to reconsider the matter, considering the petitioners' explanations and documents. The petitioners are given an opportunity to clarify their willingness to pay the demanded amount. The judgment emphasizes the need for proper adjudication based on all available information and compliance with legal procedures.

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