Supplier Due Diligence Mandatory Before Rejecting Recipient's ITC Claim

• Background:

- M/s. Suncraft Energy Private Limited ("the Respondent") sells goods, charges GST, and avails ITC on inward supplies.

- Some suppliers didn't disclose supplies in their Form GSTR-1 for the financial year 2017-18, leading to non-population in Form GSTR-2A.

• Notice from Revenue Department:

- The Revenue Department issued a notice to the Respondent due to a mismatch in ITC between Form GSTR-2A and Form GSTR-3B.

• Show Cause Notice (SCN):

- A Show Cause Notice was issued on December 06, 2022, demanding the reversal of excess ITC claimed in FY 2017-18 based on the ITC mismatch.

• Respondent's Reply:

- The Respondent denied the allegations in the SCN.

- Stated that taxes were paid to the supplier before availing ITC on inward supplies.

- Contended that, despite fulfilling Section 16(2) of the CGST Act, the department wrongly reversed the credit and demanded tax already paid to the supplier.

• Adjudicating Authority's Order:

- On February 20, 2023, the Adjudicating Authority passed an order demanding payment of INR 6,50,511 with interest and penalty.

• Appeal to Calcutta High Court:

- The Respondent appealed to the Calcutta High Court challenging the order.

• High Court's Decision (Impugned Order):

- The Hon'ble Calcutta High Court, in the case of M/s. Suncraft Energy Private Limited, set aside the order.

- Ruled that the demand notice to reverse ITC couldn't be sustained without a proper inquiry into the supplier's actions.

- Dated August 02, 2023.

• Supreme Court Appeal:

- The Petitioner, aggrieved by the Impugned Order, filed a Special Leave Petition before the Hon'ble Supreme Court of India. Assistant Commissioner of State Tax Vs. Suncraft Energy P. Ltd