ITC not Allowed if GST Registration of Seller was Cancelled & Tax was not Paid to Ex-chequer | Madras HC

Case Details: Jai Balaji Paper Cones v. Assistant Commissioner Sales Tax - [2023] 152 taxmann.com 690 (Madras)

Judiciary and Counsel Details

• • C. Saravanan, J.
  • A.R.M. Arunachalam for the Petitioner. 
  • Ms K. Vasanthamala, Adv. for the Respondent.

Facts of the Case

The petitioner purchased a consignment of goods from a supplier and paid the amount along with GST. However, the GST registration of seller was cancelled before the date of three invoices and tax was not paid to ex-chequer. The department demanded amount of tax which was claimed as input by the petitioner. It filed writ petition and contended that the petitioner cannot be asked to pay GST.

High Court Held

The Honorable High Court the GST registration of seller had been cancelled before the said three invoices raised and tax was not paid to ex-chequer by the seller. As per Section 16(2) (c) of CGST Act, 2017, a registered person is not entitled to credit of input tax in respect of any supply of goods or services of both if tax is not paid to the Government.

Therefore, the Court dismissed the petition since mandamus could not be issued to Department contrary to Section 16(2)(c) read with Rule 36(4) of CGST Rules, 2017. However, it was held that the petitioner would be entitled to recover amount from suppliers in manner known to law.