15.12.2023: No automatic reversal of ITC from the buyer upon non-payment of tax by the supplier: Supreme Court upheld the ruling of Calcutta High Court

Recently, the Supreme Court has upheld the decision of Calcutta High Court in the case of Suncraft Energy Private Limited Case vide Order No. MAT 1218 OF 2023 WITH I.A NO. CAN 1 OF 2023 dated 02.08.2023, wherein the High Court ruled that input tax credit (ITC) under GST cannot be denied over a mismatch in GSTR-2A and GSTR-3B without any investigation into the supplier. The ruling provides massive relief to companies facing demand notices on account of non-reporting or non-payment of taxes by the supplier.

Earlier, the High Court has held that there shall not be any automatic reversal of input tax credit from buyer on non-payment of tax by seller. In case of a default in payment of tax by the seller, recovery shall be made from the seller. Also, the Cout directed the department to proceed against the supplier first and only in exceptional situations like missing dealer, closure of business by supplier or supplier not having adequate assets, etc, the reversal of GST input tax credit from the buyer shall also be an option available with them.

After the such ruling by the High Court, the department filed an Special Leave Petition before the Supreme Court against the judgment of Calcutta High Court vide Diary No. 44241/2023 on 20-10-2023.  

Now, the Supreme Court vide SLP(C) No. 027827 – 027828 / 2023 dated 14.12.2023, has dismissed the Petition of the department and affirmed the judgment passed by the High Court. 

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