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HC: Quashes recovery action against service recipient for GSTR-2A-GSTR-3B

mismatch absent exceptional circumstances

Aug 02, 2023

Suncraft Energy Pvt. Ltd. vs. The Assistant Commissioner, State Tax [TS-367-HC(CAL)-2023-GST]

Conclusion
Calcutta HC sets aside demand on recipient of service on account of mismatch in GSTR 2A and GSTR 3B
in absence of any investigation done at the end of the supplier whose invoices are not reflecting in GSTR
2A; As regards the allegation of non-payment of tax by supplier and denial of ITC u/s 16(2)(c), while
disapproving action of the Assistant Commissioner, State Tax ‘straight away’ directing assessee to
reverse ITC without first bringing out the exceptional case where there has been collusion between
assessee and selling dealer/supplier or where supplier is missing or the supplier has closed down its
business or the it does not have any assets and such other contingencies; Revenue sought to reverse
credit availed by assessee and directed it to deposit tax which assessee claims has already been paid to
supplier at the time of availing goods/services; Assessee contends that despite having fulfilled all the
conditions for availing credit under section 16 (2), Revenue has revered credit availed by it; Court
pointing out that section 16 (2) begins with a non-obstante clause, discusses the effect and purpose
of Bharti Airtel, the operative portion of decision in Arise India whilst clarifying that “though the…decision
arose under the provisions of the Delhi Value Added Tax Act, the scheme of availment of Input Tax Credit
continues to remain the same even under the GST regime though certain procedural modification and
statutory forms have been made mandatory.”; Thus, from absence of any allegation in show cause notice
regarding receipt of goods or services by assessee and presence of tax invoices, bank statements
evidencing that they have paid the price for the goods and services rendered, Court opines that “the
action of the first respondent has to be branded as arbitrarily”; Further, finds that the Assistant
Commissioner, State Tax did not conduct any enquiry on the supplier “more particularly when
clarification had been issued where furnishing of outward details in Form GSTR 1 by a corresponding
supplier and the facility to view the same in Form GSTR 2A by the recipient is in the nature of tax payer
facilitation and does not impact the ability of the tax payers to avail input tax credit on self-assessment
basis in consonance with the provisions of Section 16.”; In conclusion, re-iterates that "there shall not be
any automatic reversal of input tax credit from buyer on non-payment of tax by seller’" and ‘"In case of
default in payment of tax by the seller recovery shall be made from the seller, however, reversal of credit
from buyer shall also be an option available with the revenue authorities to address exceptional
situations ..."’ and allows assessee's appeal:HC CAL

Decision Summary
The judgment was delivered by Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya.

Advocates Ankit Kanodia, Megha Agarwal, Jitesh Sah appeared on behalf of the Assessee, whereas
Revenue was represented by Government Pleader Anirban Ray assisted by AGP T.M. Siddiqui and
Advocate S. Sanyal.

The Assistant Commissioner of State Tax issued notices for recovery of the input tax credit availed by
the appellant and the grievance of assessee was that without conducting any enquiry on the supplier (the
fourth respondent) and without effecting any recovery from him. It was highlighted that assessee was a
supplier of assessee who provided supply of goods and services to it, who had made payment of tax at
the time of effecting such purchase along with the value of supply of goods/ services. However, in some
of the invoices of the said supplier was not reflected in the GSTR 2A of the assessee for Financial Year
2017-18.

Assessee relying on Union of India Vs Bharti Airtel Ltd. [TS-555-SC-2021-GST], and Circular contended
that despite having fulfilled all the conditions as has been enumerated under Section 16(2) Revenue
erred in reversing the credit availed and directing assessee to deposit the tax which has already been

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paid to the supplier at the time of availing the goods/ services.

Assessee assailed order passed by the Assistant Commissioner of State Tax by which it reversed the
input tax credit availed by it

HC made the following observations:

HC noted that for a dealer to be eligible to avail credit of any input tax, the conditions prescribed
in Section 16 (2) of the Act have to be fulfilled. Section 16 (2) commences with a non-obstante
clause stating that notwithstanding anything contained in Section 16
HC perused Circular dated October 18, 2018 and noticed that therein a clarification was issued
stating that furnishing of outward details in Form GSTR-1 by the corresponding supplier(s) and the
facility to view the same in Form GSTR-2A by the recipient is in the nature of taxpayer facilitation
and does not impact the ability of the taxpayer to avail ITC on self-assessment basis in
consonance with the provisions of Section 16 of the Act.
Thereafter, HC noted the effect and purpose of SC ruling in Bharti Airtel and discussed Arise India
Limited wherein question that arose for consideration was as to whether for the default
committed by the selling dealer can the purchasing dealer be made to bear the consequences of
the denying the ITC and whether it is the violation of Article 14 of the Constitution. In this context,
HC held that though the above decision arose under the provisions of the Delhi Value Added Tax
Act, the scheme of availment of Input Tax Credit continues to remain the same even under the
GST regime though certain procedural modification and statutory forms have been made
mandatory.
HC found that show cause notice revealed that supplier had not shown the Bill in GSTR 1 and
hence the assessee is not eligible to avail the credit of the input tax as per Section 16(2) of the
WBGST Act, 2017 as the tax charged in respect of such supply has not been actually paid to the
Government.
HC clarified that there was no denial of the fact that assessee had received the goods or services
or both since show cause notice does not alleged that assessee was not in possession of a tax
invoice issued by the supplier
HC held that the Assistant Commissioner of State Tax had not conducted any enquiry on the
supplier more particularly when clarification had been issued where furnishing of outward details
in Form GSTR 1 by a corresponding supplier and the facility to view the same in Form GSTR 2A by
the recipient is in the nature of tax payer facilitation and does not impact the ability of the tax
payers to avail input tax credit on self-assessment basis in consonance with the provisions of
Section 16.
HC noted that (i) it was clarified that there shall not be any automatic reversal of input tax credit
from buyer on non-payment of tax by seller and (ii) in case of default in payment of tax by the
seller recovery shall be made from the seller however, reversal of credit from the

buyer shall also be an option available with the revenue authorities to address the exceptional situations
like missing dealer, closure of business by supplier or supplier not having adequate assets etc.

HC observed that before directing the assessee to reverse the input tax credit and remit the same
to the government, the Assistant Commissioner ought to have taken action against the selling
dealer and unless and until it was able to bring out the exceptional case where there has been
collusion between the assessee and the supplier or where the supplier was missing or the supplier
had closed down its business or the supplier does not have any assets and such other
contingencies, straight away the Assistant Commissioner was not justified in directing the
assessee to reverse the input tax credit availed by them.

HC set aside the demand.

GSTsutra Note
Government in Press Release Dated October 18, 2018, in Para 4clarified that

“ the furnishing of outward details in FORM GSTR-1 by the corresponding supplier(s) and the facility to
view the same in FORM GSTR-2A by the recipient is in the nature of taxpayer facilitation and does not

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impact the ability of the taxpayer to avail ITC on self-assessment basis in consonance with the provisions
of section 16 of the Act. The apprehension that ITC can be availed only on the basis of reconciliation
between FORM GSTR-2A and FORM GSTR-3B conducted before the due date for filing of return in FORM
GSTR-3B for the month of September 2018 is unfounded as the same exercise can be done thereafter
also.”

Madras HC in the case of DY Beathel Entreprises vs STO [TS-190-HC(MAD)-2021-GST] held that no

GST can be demanded from the buyer for the fault of seller. Moreover, a strict action against a
seller ought to be taken in such cases.
Case Law Information

Appellant/Applicant/Complainant Name
• Suncraft Energy Pvt. Ltd

Respondent Name
• Appellate Additional Commissioner (State Tax)

Counsel of Appellant/Applicant/Petitioner
• Ankit Kanodia
• Megha Agarwal
• Jitesh Sah

Respondent Counsel
• Anirban Ray
• T. M. Siddiqui
• S. Sanyal

Authority Level & Location

• High Court Calcutta

Appeal Number
• MAT 1218 OF 2023

Date of Pronouncement
• 2023-08-02

Ruling in favour of
• Petitioner

Judges
• Justice T S Sivagnanam
• Justice Hiranmay Bhattacharyya

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