In the case D.Y. Beathel Enterprises Vs State Tax Officer (Data Cell), Madras High Court suppressed the order passed by the office of levying the entire tax liability on the purchasing dealer without involving the seller, where the payment of tax has been made to the seller under proper compliances of the law, but the same has not been remitted to the Government by the seller.
The petitioner has purchased goods and have made the complete payment to the seller including all the taxes. Some portion of the sale consideration was made through the bank. As per the return filed by the seller, the petitioner has availed the ITC on the above-mentioned purchase.
During an inspection, the State Tax Officer came to the light that seller has not paid any tax to the government, which initiated the proceedings and issuance of the show cause notice against the petitioner. Petitioner replied that all the tax liability has been paid by him, the seller should be confronted during enquiry.
Subsequently, without involving the sellers, the order has been passed against the petitioner.
According to the provisions of Section 16, CGST Act,2017, assessee must have received the goods and the tax for that supply, must have been actually paid to the government either in cash or through utilization of ITC.
Therefore, if the tax had not reached the pocket of the Government, then the liability shall be borne by either the seller or the buyer. As per the case, the officer has not taken any recovery action against the seller. When it has come out that the seller has collected tax from the Petitioner, strict and serious action ought to have been initiated against the sellers.
High Court suppressed the order of non-examination of sellers in the enquiry and non-initiation of recovery action against sellers in the first place and directed the officer to start a fresh enquiry where sellers will be examined as witnesses and to initiate recovery action against sellers.
