The Allahabad High Court, in M/s R.T. Infotech v. Additional Commissioner Grade-II & Ors., examined the legality of reversal of input tax credit and imposition of tax, interest, and penalty under Section 73 of the Central Goods and Services Tax Act, 2017, on the ground that the supplier had allegedly failed to discharge its statutory obligations. The petitioner, a registered GST dealer, was an authorised distributor of mobile recharge services and had availed services from M/s Bharti Airtel Ltd. during the period July 2017 to March 2018.

The petitioner had purchased recharge coupons under seven tax invoices aggregating to ₹1,58,46,502 and had claimed input tax credit of ₹28,52,370, comprising CGST and SGST duly charged on the invoices. It was not in dispute that the petitioner had made payment of the invoice value along with tax through banking channels, namely RTGS. During scrutiny, the department issued a notice pointing out a mismatch between the input tax credit claimed and the credit reflected in GSTR-2A. Despite the petitioner’s reply explaining that the discrepancy was not attributable to the invoices issued by Bharti Airtel and that payment had been duly made, proceedings were initiated under Section 73, culminating in reversal of ITC, levy of interest, and imposition of penalty.

The petitioner contended that it had no control over the supplier’s obligation to file returns or deposit tax with the Government treasury and that it could not be penalised for the supplier’s default. Reliance was placed on the judgment of the Supreme Court in Assistant Commissioner of State Tax v. Suncraft Energy Pvt. Ltd. and the decision of the Madras High Court in D.Y. Beathel Enterprises v. State Tax Officer, which held that action must be taken against the defaulting supplier and that the bona fide purchaser cannot be made to suffer for the supplier’s non-compliance.

The High Court observed that the record clearly established payment of tax by the petitioner through banking channels and that proceedings had, in fact, been initiated against the supplier for non-discharge of statutory duties. The Court held that under the GST regime, a purchasing dealer cannot compel the supplier to file returns or deposit tax and cannot be left at the mercy of the supplier. Where the purchaser has acted diligently and fulfilled all statutory requirements, denial of input tax credit solely due to supplier’s default is unsustainable.

Accordingly, the High Court quashed the impugned assessment and appellate orders and remanded the matter to the competent authority for fresh consideration, directing that a reasoned and speaking order be passed after hearing all stakeholders within a stipulated period. The writ petition was allowed.


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