Responsibility of Purchaser is limited to the extent of verifying GST Registrstion of the Supplier on GST Portal – Hon’ble Andhra Pradesh High Court
Here is an interesting judgement by AP High Court on the issue of claim of ITC in GST. It has been held by the High Court that the 𝐑𝐞𝐬𝐩𝐨𝐧𝐬𝐢𝐛𝐢𝐥𝐢𝐭𝐲 𝐨𝐟 𝐏𝐮𝐫𝐜𝐡𝐚𝐬𝐞𝐫 𝐢𝐬 𝐥𝐢𝐦𝐢𝐭𝐞𝐝 𝐭𝐨 𝐭𝐡𝐞 𝐞𝐱𝐭𝐞𝐧𝐭 𝐨𝐟 𝐯𝐞𝐫𝐢𝐟𝐲𝐢𝐧𝐠 𝐆𝐒𝐓 𝐑𝐞𝐠𝐢𝐬𝐭𝐫𝐚𝐭𝐢𝐨𝐧 𝐨𝐟 𝐭𝐡𝐞 𝐒𝐮𝐩𝐩𝐥𝐢𝐞𝐫 𝐨𝐧 𝐆𝐒𝐓 𝐏𝐨𝐫𝐭𝐚𝐥=.
The case detail is as under:
𝐌/𝐬 𝐀𝐫𝐡𝐚𝐚𝐧 𝐅𝐞𝐫𝐫𝐨𝐮𝐬 𝐚𝐧𝐝 𝐍𝐨𝐧-𝐅𝐞𝐫𝐫𝐨𝐮𝐬 𝐒𝐨𝐥𝐮𝐭𝐢𝐨𝐧𝐬 𝐏𝐯𝐭. 𝐋𝐭𝐝.
𝐃𝐞𝐩𝐮𝐭𝐲 𝐀𝐬𝐬𝐢𝐬𝐭𝐚𝐧𝐭 𝐂𝐨𝐦𝐦𝐢𝐬𝐬𝐢𝐨𝐧𝐞𝐫
[𝐖𝐫𝐢𝐭 𝐏𝐞𝐭𝐢𝐭𝐢𝐨𝐧 𝐍𝐨. 𝟏𝟓𝟒𝟖𝟏/𝟐𝟎𝟐𝟑 | 𝐎𝐫𝐝𝐞𝐫]
The Petitioner, a trader in iron scrap, bought iron scrap from M/s K.S. Enterprises in Vijaywada and sold it to M/s Radha Smelters Pvt. Ltd. in Sankarampet with valid documentation. The goods were being transported by Mr. T. Srinivasulu’s vehicle. The Respondent intercepted the goods in transit, contending that supplier – M/s K.S. Enterprises, had no business location in Vijaywada, and took action against supplier under Section 130 of the CGST Act, 2017. The Petitioner argued that the Respondent ignored the documents evidencing its ownership of goods during interception. They emphasized that action should be taken against the Transporter as per Section 129 of the CGST Act, 2017, since the Petitioner was the one transporting the goods. The Petitioner also stated that they had no obligation to verify the supplier’s business location beyond checking their GST registration and making payments. Further, that the Respondent’s suspicions about the supplier’s registration shouldn’t impact the legitimacy of the transaction between the Petitioner and the Supplier.
Issue: Can goods of the assessee be confiscated based on the proceedings initiated against the supplier of the assessee?
The Court concluded that while the Respondent can take action against the Supplier due to their absence at the specified address and lack of business premises, confiscating the Petitioner’s goods solely based on their purchase from the Supplier is not justified. The Court found doubts about the Petitioner’s claim of purchasing goods, given the uncertainty about the Supplier’s existence. Therefore, the Respondent can proceed under Section 129 of the CGST Act against the Petitioner. This entails initiating an inquiry and allowing the Petitioner a chance to present their case. The Respondents were directed to release the detained goods in favour of the Petitioner on deposit of 25% of the value of goods and execute a bond for the balance and shall also release the vehicles in favour of the transporter.
The Hon’ble Court concludingly held that the Petitioner’s responsibility was limited to the extent of establishing that he bona-fidely purchased goods from the Supplier for valuable consideration after verifying the GST registration of the said supplier on the GST portal.