2025-VIL-1211-KER
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SGST High Court Cases

GST - Non-payment of tax by supplier, Recovery of input tax credit from purchasing dealer, obligation to initiate proceedings against supplier before proceeding against recipient - Petitioner had effected certain purchases covered by invoices issued by the suppliers [2nd and 3rd respondents] and claimed ITC based on these invoices. However, the suppliers failed to furnish the details of the supplies made to the petitioner and did not pay the tax covered by the invoices - Whether the proceedings could have been initiated against the petitioner without first initiating proceedings against the suppliers as mandated under Section 42 of the CGST Act, 2017 - HELD - The proceedings initiated against the petitioner are not legally sustainable as no proceedings were initiated against the suppliers before issuing the show cause notice to the petitioner - In terms of sub-section (3) of Section 42, there is obligation imposed upon the assessing authority, to issue a notice communicating the discrepancy, to both supplier and purchasing dealer. However, before issuing show cause notice to the petitioner, no such proceedings have been followed - Further, only in the absence of the supplier failing to rectify the discrepancy, the output tax liability can be imposed upon the recipients. Therefore, going by the scheme contemplated under Section 42, as it stood at the relevant time, no proceedings should have been initiated against the petitioner without issuing a notice to the supplier - The Calcutta High Court in Suncraft Energy Pvt. Ltd. case has held that the recovery proceedings can be initiated against the recipient (purchaser) only if the proceedings initiated against the supplier did not materialize, except in cases of collusion between the recipient and supplier. Since no such proceedings were initiated against the suppliers in the present case, the notice issued to the petitioner is not sustainable - The show cause notice issued to the petitioner are quashed and set aside - The writ petition is disposed of
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