For Seller’s Fault of Non Payment of Government Taxes No GST is to be demanded from Buyer

By | April 26, 2022

For Seller’s Fault of Non Payment of Government Taxes No GST is to be demanded from Buyer

The Hon’ble Madras court in M/s. D. Y. Bethel Enterprises v. the State Tax Officer [W.P. (MD) Nos. 2127, 2117, 2121, 2152, 2159, 2160, 2168, 2177, 2500, 2530, 2532, 2534, 2538, 2539, 2540, 2503 & 2504 of 2021 & Ors., dated Feb 24, 2021] canceled the order lapsed the officer levying the complete liabilities on the buying dealer while not involving the vendor, wherever the payment of tax has been created by the buying dealer, However, an equivalent has not been remitted to the government by the vendor. Held that, the omission on the part of the vendor to remit the tax ought to be viewed terribly seriously and strict action needs to be initiated against the vendor.

 Facts:

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M/s. D. Y. Beathel Enterprises (“the Petitioner”) herein as the dealers of Raw Rubber Sheets. in keeping with the Petitioner they’d purchased merchandise from Charles and his wife Shanthi (“Sellers”) and also the payments were created by the Petitioners to Sellers enclosed the tax element. a considerable portion of the sale thought was paid through banking channels. supported the returns filed by the Sellers, the Petitioner availed Input Credit (“ITC”).

 Throughout review by the State Tax Officer (“the Respondent”), it came to the view that Sellers failed to pay any tax to the government, which necessitated initiation of the proceedings and issuing of show-cause notices to the Petitioner. The Petitioner submitted their replies specifically taking the stand that each one of the amounts collectible by them had been already paid, therefore, those Sellers can need to be essentially confronted throughout the inquiry. later on, while not involving the Sellers, the Respondent passed the order (“impugned order”) levying the complete liability on the Petitioners.

 Being discontented,  the Petitioner has filed this petition against the impugned order.

 Issue:

Whether the Respondent will levy the whole demand on the Petitioner, while not involving the Sellers, wherever the tax has not been remitted to the governemnt by the Sellers?

Held:

 The Hon’ble Madras court in W.P. (MD) Nos. 2127, 2117, 2121, 2152, 2159, 2160, 2168, 2177, 2500, 2530, 2532, 2534, 2538, 2539, 2540, 2503 & 2504 of 2021 & Ors., dated February 24, 2021 command as under:

  •  Analyzed the supply of Section 16 of the Central Goods and Services Tax Act, 2017 (“CGST Act”), and noted that the assessee should have received the products and therefore the tax charged in respect of its provisions, should are truly paid to the govt. either in money or through the utilization of ITC, permissible in respect of the same provider. Therefore, if the tax had not reached the kitty of the govt., then the liability could be eventually borne by one party, either the vendor or the client.
  •  Ascertained that, the Respondent has not taken any recovery action against the vendor. once it’s commenced that the vendor has collected tax from the Petitioner, the omission on the part of the Sellers to remit the tax should are viewed terribly seriously and strict action needs to be initiated against the Sellers.
  •  Noted that the Respondent took a stand that there was no movement of products. Held that, if there was no movement of the products, the examination of Sellers became additional necessary and imperative. However, the Respondent didn’t make sure of the presence of Sellers within the inquiry even once the Petitioners insisted on an equivalent. Hence, the Impugned order suffers from bound elementary flaws.
  • Canceled the Impugned order due to non-examination of Sellers within the inquiry and non-initiation of recovery action against Sellers within the 1st place and revoked back the whole matter of the Respondent.
  • Directed Respondent to carry the inquiry anew wherever Sellers can to be examined as witnesses and to initiate recovery action against Sellers. Our comments: to grasp additional,

 Relevant Provisions:

Section 16(1) and (2) of the CGST Act:

“16.Input Tax Credit Taking  Eligibility and conditions

. (1) Each registered person shall, subject to such conditions and restrictions as could also be prescribed and within the manner laid out in section 49, be entitled to require credit of input tax charged on any provider of products or services or each to him that are used or supposed to be utilized in the course or furtherance of his business and also the same quantity shall be attributable to the electronic credit ledger of such person.

 (2) Still something contained during this section, no registered person shall be entitled to the credit of any input tax in respect of any provider of products or services or each to him unless,–– (a) He’s in possession of a tax invoice or debit note issued by a provider registered under this Act, or such different tax paying documents as could also be prescribed;

 (b) He has received the products or services each.

Explanation.

-For the needs of this clause, it shall be deemed that the registered person has received the products or because the case could also be, services––

 (i) Wherever the products that are to be  delivered by the provider to a recipient or the other person on the direction of such registered person, whether or not acting as agent or otherwise, before or throughout movement of products, either by means of transfer of documents of title to the product or otherwise;

 (ii) Wherever the services that are provided by the provider to a person on the direction of and on account of such registered person. (c) Subjected to the provisions of section 41 or section 43A], the tax charged in respect of such provision has been truly paid to the government, either in money or through the activity of input tax credit allowable in respect of the same supply;

(d) he has stocked the come back beneath section 39:

            As long as wherever the products are against an invoice received in tons or installments, the registered person shall be entitled to require credit upon receipt of the last heap of installment:

               Provided additional that wherever a recipient fails to pay to the provider of products or services or each, apart from the provides on that tax is due on a reverse charge basis, the quantity towards the worth of providing together with tax due on that among an amount of 180 days from the date of issue of invoice by the provider, Equal amount to the input tax credit availed by the recipient shall be more to his output liabilities, together with interest on that, in such manner as is also  prescribed:

 Provided also that the recipient shall be entitled to avail of the credit of input tax on payment created by him of the quantity towards the worth of providers of products or services or each together with tax due on that.”

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