Order based on Section 16(2)(c) not tenable, when it do not conclusively states that the supplier has failed to pay taxes

Facts of the case: In this case, impugned order followed SCN alleging that the petitioner had not correctly disclosed his tax liability and had availed excess ITC, alleging incorrect ITC availed due to a supplier’s registration being cancelled before the invoice date. The Petitioner argued that they were a bona fide purchaser, having bought goods and paid taxes to Modern Traders, whose registration was retrospectively cancelled and had provided invoices, ledger accounts, and payment details to support the legitimacy of the transactions with the supplier. However, the respondents contended that the petitioner’s claim was unsatisfactory because Modern Traders’ registration was canceled retroactively, and there was no substantial proof to support the petitioner’s response. Further, contended that the petitioner failed to provide e-way bills proving the receipt of goods, suggesting that the invoices might be “Good-less invoices.”

Held that: The Delhi High Court found the impugned order unreasoned, noting it did not specify why the petitioner’s response was unsatisfactory or provide evidence that Modern Traders (i.e. the supplier ) had not paid the taxes due on the supplies made to the petitioner. The SCN was based on Section 16(2)(c) of the CGST/DGST Act, which concerns the non-payment of tax by the supplier, it was noted that the impugned order did not conclusively state that the supplier had failed to pay the taxes. Despite the petitioner having the option to appeal, the court decided it was not necessary to relegate the petitioner to this remedy, given the unreasoned nature of the impugned order. The court set aside the impugned order and remanded the matter back to the Adjudicating Officer for a fresh decision, ensuring the petitioner is given an opportunity to be heard.

To read the complete judgment 2024 taxo.online 1585