Seller not paying GST should be questioned first before denying ITC of the buyer : Thank You Madras HC
In the matter of availing ITC by a buying dealer, ITC claims are subject to availability of details of outward supplies made by the supplier-taxpayer in its Form GSTR-2A or the Form GSTR-2B auto-populated based on the GSTR-1 filed by the suppliers.
The provisions of Section 16 (1) and (2) of CGST Act 2017 prescribe not only the condition that the buyer should be in possession of tax invoice of the supplier, but also specify that the seller should have actually paid the tax on his sales and filed the returns under Sec.39.
In case the seller has failed to discharge his obligations prescribed under the Act the buyer is being punished by way of denial of ITC though the buyer has duly paid the amount to purchaser. In a specific case the dealer has actually effected purchases from other two registered dealers in the same circle, and payments were made through banking.
The seller has not filed any returns and hence the department proceeded action against the buyer.
On being contested, the Madurai Bench of High Court of Madras in its WP (MD) 2127 (with several similar petitions) dated 24-02-2021 in the case of M/s DY Beathel Enterprises Vs. STO (Investigation Wing) Tirunelveeli has set aside the order and remitted back for proper enquiry of the sellers also.
The copy of judgement in PDF format is attached for information.
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