Proceedings against Supplier and Recipient for non payment of tax

[Ganesh S]

Dear All,

During investigation, amounts were recovered from the recipient as ineligible ITC for the reason the supplier had not paid the taxes. Later, proceedings were initiated against the supplier and order passed confirming the demand towards non-payment of tax which covers the above transaction related to ineligible ITC. 

SCN is now issued on the recipient to appropriate the recovery made during investigation. Are there decisions which prohibits issuance of SCN on the recipient when the proceedings are already concluded against the supplier for the same issue (GST/VAT). 

Thanks. 

AI Summary

SC ruling limits ITC recovery from recipients for supplier GST default, stressing Section 16 and CBIC guidance A recipient's ineligible input tax credit (ITC) was recovered during investigation because the supplier had not paid GST. Subsequently, demand proceedings against the supplier were concluded for non-payment of tax, covering the same transactions. A show cause notice has now been issued to the recipient to appropriate the recovered amount, prompting the query whether such notice is permissible when proceedings on the same issue are already concluded against the supplier. The cited Supreme Court order, upholding a High Court decision, indicates authorities must first proceed against the supplier and may proceed against the recipient only in exceptional circumstances as clarified by CBIC, with the revenue's special leave petition dismissed.