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Buyer not liable for Supplier's Faults under GST

Verifying GST Registration of suppliers is crucial for Purchasers in GST Disputes

 
Buyer not Liable


In a recent legal development, the Hon’ble Supreme Court of India, in the case of Deputy Assistant Commissioner-1 (ST) v. Arhaan Ferrous and Non-Ferrous Solutions (P.) Ltd. held that the Apex Court was not inclined to interfere in the matter, resulting in the dismissal of the SLP. The Andhra Pradesh High Court had clarified the limited responsibility of purchasers in GST disputes. The court's decision, dated November 6, 2023, emphasizes that a purchaser's role is confined to proving the bona fide purchase of goods from a supplier by verifying the supplier's GST registration on the official web portal.


Factual Background:

Arhaan Ferrous and Non-Ferrous Solutions Pvt. Ltd. engaged in the trading of iron scrap, faced complications when the Revenue Department detained their goods during transit. Allegedly, the supplier had no established business premises, prompting the authorities to initiate proceedings against the supplier under Section 130 of the Central Goods and Services Tax Act, 2017.


Petitioners contentions:

The petitioner contended that the detained consignment of Iron scrap belongs to them and was purchased under a valid invoice. The supplier having sold the goods, has no interest in the goods. Therefore, petitioners' goods cannot be detained due to suppliers' fault.


The Andhra Pradesh High Court's View:

The Andhra Pradesh High Court held that while proceedings against the supplier may be warranted, the authorities cannot confiscate the goods merely based on the purchaser's association with the supplier. The court further stressed that the purchaser's responsibility is limited to establishing the bona fide purchase through proper verification of the supplier's GST registration.


Key Court Findings:


  1. Limited Purchaser Responsibility: The Andhra Pradesh High Court held that the purchaser's responsibility extends only to proving the legitimate purchase of goods from the supplier. The onus lies on the purchaser to verify the supplier's GST registration on the official web portal.

  2. Enquiry and Documentation: The court highlighted that the purchaser must present authenticated documents demonstrating the bona fide purchase, including the mode of payment and receipt of goods. However, the purchaser is not obligated to delve into the supplier's business activities or question the authenticity of the supplier's GST registration.

  3. Initiation of Independent Proceedings: The court criticized the Revenue Department's decision to involve the purchaser in proceedings against the supplier without initiating independent proceedings under Section 129 of the CGST/APGST Act against the purchaser.

The Supreme Court, in its November 6, 2023 decision, declined to interfere in the matter, resulting in the dismissal of the Special Leave Petition (SLP). Consequently, the dispute was disposed of, affirming the principles laid out by the Andhra Pradesh High Court.


Conclusion:

The ruling provides clarity on the limited responsibility of purchasers in GST disputes, emphasizing the importance of verifying suppliers' GST registrations. This decision is pivotal in safeguarding purchasers from undue repercussions in cases where suppliers may be subject to regulatory scrutiny.



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