Recovery action first to be initiated towards the defaulting sellers before imposing responsibility on the dealer
There are lot of cases wherein the recovery proceeding is initiated against the buyer rather than initiating first against the seller who has failed to deposit the amount of tax on their sale.
Here is an interesting judgment by Madras High Court on the same issue wherein it has been held that Recovery action first to be initiated towards the defaulting sellers
before imposing responsibility on the dealer. The case detail is as under:
DY BEATHEL ENTERPRISES vs. THE STATE TAX OFFICER
[2021 (3) TMI 1020 (MADRAS HIGH COURT)]
The issue before the courts were as under:
– Whether the GST Authorities can recover the GST tax liability from the assessee, without involving the defaulting sellers, where the tax was not remitted to the Revenue by the sellers?
Madras High Court has held as under:
- Revenue should not reverse ITC availed by the assessee for failure of seller to deposit tax on such supply without first examining the defaulting sellers and initiating recovery proceeding against the sellers who did not deposit the tax with the Revenue.
- Accordingly, the matter was remitted to the GST Authorities for conducting fresh enquiry and initiating recovery action first against the defaulting sellers before making any attempt to recover the amount from the assessee.
- In short, the Recovery action first to be initiated towards the defaulting sellers before imposing responsibility on the dealer
