Facts of the Case:

In this case, the petitioner challenged the O-I-O whereby tax liability was imposed upon it in its capacity as a supplier. The basis of such liability was the alleged violation of clauses (iii), (v), and (ix) of Notification No. 41/2017-Integrated Tax (Rate) dated 23.10.2017, which governs concessional rate of tax for supplies made to exporters.

The petitioner contended that the conditions prescribed under the said notification were required to be fulfilled by the recipient/exporter and not by the supplier. Therefore, fastening liability on the supplier was legally untenable. It was further submitted that the petitioner had duly responded to the show cause notice by filing a detailed reply along with relevant documents, including shipping bills and other supporting evidence to demonstrate compliance with the notification conditions.

Additionally, the petitioner placed further documents on record through a memo before the Court and argued that, if given an opportunity, it could substantiate that all conditions of the notification had been complied with. However, the adjudicating authority failed to properly consider the reply and documents submitted by the petitioner and proceeded to pass the impugned order.

The revenue, on the other hand, argued that non-compliance with the notification conditions, even if attributable to the recipient, could have consequences for the supplier as well, particularly where documentation requirements were not met.

Issue:

Whether tax liability under Notification No. 41/2017 can be imposed on the supplier for alleged violations of conditions that are primarily required to be fulfilled by the recipient/exporter.

Held That:

The Court observed that although the adjudicating authority had referred to the alleged violations of clauses (iii), (v), and (ix) of Notification No. 41/2017, there was no proper evaluation of the petitioner’s reply or the documents placed on record.

The Court noted that the petitioner had specifically contended that the relevant conditions under the notification had been complied with and had also produced documentary evidence in support of such compliance. However, the impugned order did not reflect due consideration of these materials, thereby indicating lack of proper application of mind.

The Court further took note of the petitioner’s submission that the obligations under the notification were primarily cast upon the recipient/exporter and that fastening liability on the supplier required a careful examination of the statutory scheme and the nature of conditions prescribed.

In view of these deficiencies, the Court held that the matter could not be sustained in its present form and required fresh adjudication. Accordingly, the impugned Order-in-Original was set aside and the matter was remitted back to the adjudicating authority for reconsideration. The authority was directed to re-examine the case by properly appreciating the petitioner’s reply, documents already on record, and any additional material that may be produced.

Case Name: The Stems N Leaves International Versus The Superintendent of Central Tax (GST) Mangaluru. Dated 07.04.2026

To read the complete judgement 2026 Taxo.online 884