Purchasing Dealer Can’t Be Denied GST ITC For Selling Dealer’s Default: Allahabad High Court 

The Allahabad High Court while remanding the matter back held that the purchasing dealer cannot be denied Input Tax Credit (ITC) for selling dealer’s default.

The bench of Justice Piyush Agrawal has observed that the purchasing dealer can also not compel the selling dealer to file the return within stipulated time and deposit the tax collected. The purchasing dealer cannot be left at the mercy of the selling dealer. When the petitioner has discharged his duties diligently, it is the onus upon the assessing authority to duly communicate about the said fact i.e. the purchase has been made through tax invoices and payments have been made through banking channel and therefore, the authority ought to have counterpart of the selling dealer have initiated action and action has been taken with the benefit ought to have given to the petitioner.

The petitioner/assessee is a registered supplier having GSTIN and is authorized user of services of mobile recharge of M/s Bharti Airtel Ltd., Vibhuti Khand, Gomti Nagar, Lucknow for the period of 2017-18. He submits that the petitioner uses services of recharged coupons from M/s Bharti Airtel Ltd., against 7 tax invoices amounting to Rs. 1,58,46,502 wherein the petitioner claimed ITC of Rs. 28,52,370.

On the bills, the CGST and SGST which were charged to the tune of Rs.14,26,185/- each, was paid. He further submits that on 08.07.2021, notice was issued by the department in form GST ASMT-10 under Section 70 of the Act, intimating discrepancy in the return of the petitioner after scrutiny, to which the petitioner in form of ASMT-11, submitted reply, clearly stating therein that the difference of ITC claimed and credit appearing in GSTR-2A is not of the bills of M/s Bharti Airtel Ltd. and the payment has been made on the above seven bills through R.T.G.S.

The petitioner submitted that the liability of tax has duly been discharged by the petitioner and no inaction on the part of the petitioner and therefore, the petitioner cannot be held responsible, but not being satisfied with the same, the department issued a show cause notice to the petitioner under Section 73 of the Act in GST DRC-01, stating that the ITC has wrongly been claimed as per Section 16 (2) (C) of the Act to which the petitioner has submitted a detailed reply stating that the recovery proceedings may be initiated against the M/s Bharti Airtel Ltd., the seller, rather against the petitioner, but not being satisfied with the same, the State authorities passed an order under Section 73 of the Act whereby directing to deposit the amount of Rs.28,52,370 and in addition to it, 10% penalty was also imposed as well as on reverse ITC, an interest was also calculated. Against the order, the petitioner preferred an appeal, which has also been dismissed.

The court while allowing the writ petition remanded the matter to the department for deciding afresh by passing a reasoned and speaking order, after hearing all the stakeholder, within a period of two months.

Case Details

Case Title: M/S R.T. Infotech Versus Additional Commissioner Grade 2 And 2 Others

Case No.: WRIT TAX No. - 1330 of 2022

Date: 30.05.2025

Counsel For Petitioner: R.R. Agrawal, Senior Counsel, Suyash Agarwal

Counsel For Respondent: C.S.C.

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