2025 (8) TMI 1289 - HC - GST

Challenge partly allowed; matter remanded to appellate authority; supplier to rectify belated GST, repay Rs139,380.48, credit ledger recredited

Rabin Sarkar, Proprietor of Dolphin Enterprises Versus Deputy Commissioner of Revenue, State Tax & Ors.

Rabin Sarkar, Proprietor of Dolphin Enterprises Versus Deputy Commissioner of Revenue, State Tax & Ors. - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether the appellate order passed under Section 107 of the CGST/WBGST Act, 2017 requires interference where recovery from a taxpayer's cash/credit ledger was effected on account of alleged non-payment or non-uploading of Input Tax Credit by the supplier. 2. Whether amounts subsequently admitted and paid by the supplier (including payments made by filing Form GST DRC-03) oblige the appellate authority/state authorities to revisit or rectify the order of recovery and recredit amounts recovered from the taxpayer's ledger. 3. The extent to which a supplier's belated payment for supplies (including payments made for a different tax period) affects the taxpayer's liability and the obligations of revenue authorities to assist in rectification. 4. Whether the appellate authority must be directed to re-examine the matter and, pending re-examination, whether recovered amounts must be recredited to the taxpayer forthwith. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Interference with appellate order under Section 107 where recovery arises from supplier's failure to discharge statutory obligations Legal framework: Section 107 (appeal), Section 73 (determination of tax not paid or short paid), provisions governing Input Tax Credit (GSTR-1/GSTR-2A/ledger adjustments) and recovery from a taxpayer's cash/credit ledger under the said Act. Precedent Treatment: No prior judicial authority was relied upon or considered in the judgment; the Court proceeded on the statutory scheme and documentary record. Interpretation and reasoning: The Court examined documentary material showing that the recovery was attributable to the supplier's failure to correctly pay or upload IGST/CGST. Given the supplier's acknowledgment and documentary evidence of payment (via DRC-03 and other communications), the Court held that the factual basis for saddling the taxpayer with recovery was undermined and required reconsideration by the appellate authority under Section 107. Ratio vs. Obiter: Ratio - an appellate order resulting in recovery from a taxpayer's ledger, when founded on supplier non-compliance subsequently admitted and rectified by the supplier, warrants reconsideration by the appellate authority. Obiter - incidental remarks about procedural assistance by respondents to the supplier. Conclusion: The appellate order dated 12th November 2024 is set aside and the matter remanded to the appellate authority for fresh consideration in light of supplier admissions and payments. Issue 2 - Effect of supplier's belated payment (including by DRC-03) on recredit/recovery from taxpayer's ledger Legal framework: Mechanisms for rectification and adjustment under GST (including Form GST DRC-03 for deposit of tax), and the ledger recredit procedure for amounts recovered erroneously. Precedent Treatment: No case law referenced; decision based on statutory procedure and equitable considerations. Interpretation and reasoning: The Court accepted the supplier's certificate and the revenue's communication acknowledging receipt/accounting of significant sums. Where the supplier has admitted an inadvertent omission and has effected payment (even if belatedly or for a different tax period), the supplier is obliged to take rectification steps to ensure correct matching and accounting. The revenue and appellate authority must assist in rectification. In the meantime, amounts already recovered from the taxpayer should not remain debited if the recovery rests on supplier non-compliance now admitted/rectified. Ratio vs. Obiter: Ratio - where a supplier has paid tax attributable to supplies to a taxpayer, recovery already made from the taxpayer's ledger should be recredited forthwith pending appellate reconsideration; supplier remains liable to ensure correct accounting and make rectification steps. Obiter - commentary that payment for a different tax period may complicate accounting but does not absolve supplier liability. Conclusion: Recovery made by the appellate authority shall be recredited to the taxpayer's credit ledger forthwith and in any event within two weeks of communication of the order; the supplier must take steps to rectify the mistake unless rectification has already been effected. Issue 3 - Supplier's ongoing statutory liability where some sums remain unpaid/ unaccounted for Legal framework: Statutory obligation of the supplier to discharge CGST/IGST and to upload returns (GSTR-1) so that recipients can avail correct Input Tax Credit; provisions enabling revenue to determine tax and recover from recipients where supplier non-compliance is found. Precedent Treatment: No precedent applied; Court relied on statutory duties and admissions on record. Interpretation and reasoning: The Court noted that despite admissions and partial payments, a balance (expressed in the record as Rs.139,380.48) remained unaccounted for. The supplier's acknowledgment that supplies were effected to the taxpayer precludes the supplier from avoiding statutory liability. Consequently, the supplier must pay the outstanding amount unless already paid and properly accounted. Ratio vs. Obiter: Ratio - a supplier who admits supplies and whose failure caused recovery against a recipient cannot be permitted to escape liability; remaining unpaid amounts must be paid and accounted for. Obiter - practical directions that respondents assist the supplier in rectification. Conclusion: The supplier is directed to pay the outstanding amount (unless already paid and accounted for); the revenue must ensure proper accounting and assist in rectification. Issue 4 - Remand, directions for action and timeline for recredit Legal framework: Appellate revisional powers and remedial relief available in writ jurisdiction where statutory action leads to potential injustice; ledger adjustment mechanisms under GST law. Precedent Treatment: Not cited; Court exercised remedial supervisory jurisdiction consistent with statutory scheme. Interpretation and reasoning: Given the admitted payments and unresolved accounting, the Court found it appropriate to remand to the appellate authority for resolution rather than decide the tax merits on the writ record. To prevent prejudice during remand, immediate recredit of amounts recovered was ordered with a clear timeline. The Court also required the respondents to assist the supplier in rectification and to act on the server copy of the order. Ratio vs. Obiter: Ratio - where factual admissions and documentation show that recovery from a taxpayer is premised on supplier default later admitted and partly rectified, a remand to the appellate authority with a direction for immediate recredit is an appropriate remedy. Obiter - suggestions on administrative cooperation and use of server copy. Conclusion: The appellate order is set aside and the matter remanded; recovery already made shall be recredited within two weeks; respondents shall assist supplier in rectification; parties to act on the court's server copy.