Facts of the Case

The petitioner, Rabin Sarkar, proprietor of Dolphin Enterprises, challenged an appellate order passed under Section 107 of the CGST/WBGST Act, 2017 and sought refund of Rs. 1,67,974 allegedly illegally recovered from his cash/credit ledger. The recovery flowed from an order under Section 73 for tax period 2018-19, passed on the ground that the petitioner's supplier, BSNL, had not correctly paid the IGST charged on supplies to the petitioner or uploaded it in Form GSTR-1. BSNL subsequently admitted the lapse and made a belated payment of Rs. 5,65,020 via Form GST DRC-03 on 21.03.2025, with a further Rs. 91,908 acknowledged by the department, leaving a balance of Rs. 1,39,380 still unpaid by BSNL.

Issues Involved

  1. Whether a buyer can be made to bear the tax liability, through denial or recovery of input tax credit, for a supplier's default in paying IGST and uploading it in GSTR-1.
  2. Whether the amount already recovered from the petitioner's credit ledger should be recredited once the supplier makes belated payment.

Petitioner's Arguments

  • The purchases from BSNL had attracted IGST which BSNL admittedly failed to pay in time, and the petitioner was being unnecessarily saddled with the tax component due to BSNL's own default.
  • BSNL's counsel had placed on record a certificate admitting the inadvertent mistake and confirming belated payment of a large part of the shortfall.

Respondent's Arguments

  • The State's counsel confirmed that Rs. 5,65,020 and Rs. 91,908.18 had already been paid/accounted for by BSNL, though contending part of it was deposited for a different tax period.

Court Order / Findings

  • Having regard to BSNL's admission of the lapse and its belated payment via Form GST DRC-03, the Court directed BSNL to take appropriate steps to rectify the mistake and directed the department to assist BSNL in doing so.
  • The Court set aside the appellate order and remanded the matter, directing that any amount already recovered from the petitioner's credit ledger be recredited within two weeks, while directing BSNL to separately pay the outstanding Rs.1,39,380.48 as it could not be permitted to absolve itself of its statutory liability.

Important Clarification

  • Where denial of input tax credit or recovery from a buyer's ledger stems from the supplier's own failure to pay tax or upload GSTR-1, and the supplier subsequently admits and rectifies the default, courts will direct recrediting the buyer's ledger rather than let the buyer continue to bear the burden.
  • A supplier cannot escape its independent statutory obligation to pay CGST/IGST on supplies actually effected, merely because the buyer has separately been proceeded against.

Sections Involved

  • Section 73, CGST/WBGST Act, 2017 – demand raised against the buyer for mismatch traceable to the supplier's non-payment/non-uploading.
  • Section 107, CGST Act, 2017 – appellate order challenged in the writ petition.
  • Form GSTR-1 and Form GST DRC-03 – outward supply return and voluntary/belated payment form used by BSNL to rectify the default.

Decision – In Favour of

The decision is in favour of the assessee-petitioner. The recovery from the petitioner's credit ledger was directed to be recredited, with BSNL separately directed to clear its own outstanding tax liability.

Case Details

Court: High Court at Calcutta — Case No.: WPA 30862 of 2024 — Coram: Hon'ble Mr. Justice Raja Basu Chowdhury — Date of Order: 6 August 2025.

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