ITC not available if Suppler failed to pay GST. However Double Taxation Not Allowed. Restore the ITC, when Recovery is Made. Rectification

 



Recipients of supply were not entitled to ITC in respect of supplies made to them in terms of section 16(2)(c) of CGST Act, 2017 when supplier who charged tax from them on such supplies failed to deposit the same with Department.  However Double Taxation is not Allowed.  Restore the ITC, when recovery is made.


Order passed on ROM application without hearing assessee, being in violation of principles of natural justice and provisions of the third proviso to section 161 of CGST Act, 2017, was not sustainable

[2023] 149 taxmann.com 13 (Madras) Pinstar Automotive India (P.) Ltd. v. Additional Commissioner

Input tax credit - Tax charged but not deposited by suppliers - ITC was denied to petitioner-assessee in respect of supplies made to them supplier had charged tax from them on such supplies but failed to remit same to Department - Undisputedly, provisions of section 16(2)(c) are required to be followed strictly and as per said section, interest of revenue are to be protected by meeting tax liability at hands of supplier or purchaser - Hence, no fault could be attributed to revenue in denying ITC to assessee when supplier did not deposit tax with Department that was charged from them in respect of supplies made to them by him - However, where tax liability was met by way of reversal of ITC at purchaser's end and recovery was also effected from supplier, that would amount to double taxation - In such cases, Department should restore ITC to purchaser if tax liability was made good by supplier - Therefore, a mechanism must be put in place to address this situation [Section 16 of Central Goods and Services Tax Act, 2017/Tamil Nadu Goods and Services Tax Act, 2017] [Paras 3 to 6, 9 and 10] [In favour of assessee]


Rectification of mistake - Principles of natural justice - ROM application was filed by petitioner-assessee against adjudication/assessment order that was passed without considering/referring to certain decisions/case laws while dealing with dispute relating to availability of ITC - Said application was disposed ex parte - HELD : Failure to give opportunity of hearing to assessee prior to disposal of their ROM application was a fatal flaw and clearly contrary to third proviso to section 161 of Central Goods and Services Tax Act, 2017 which mandated authority to follow due process before taking any adverse view against them - Hence, order passed disposing of ROM application was quashed and authority was directed to pass fresh order thereon after issuing notice to assessee and thereafter, hearing them [Section 161 of Central Goods and Services Tax Act, 2017/Tamil Nadu Goods and Services Tax Act, 2017] [Paras 8, 11 and 12] [In favour of assessee]

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