ITC Not to Be Denied to Purchasing Dealer on Selling Dealer’s Failure to Deposit Collected Tax | HC
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- Last Updated on 3 April, 2025
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Case Details: McLeod Russel India Ltd. vs. Union of India - [2025] 172 taxmann.com 663 (Gauhati)
Judiciary and Counsel Details
- Vijay Bishnoi, CJ. & N. Unni Krishnan Nair, J.
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A. Kanodia, Adv. for the Petitioner.
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H. Baruah, Adv. & S.C. Keyal for the Respondent.
Facts of the Case
The assessee, a purchasing dealer, challenged the validity of Section 16(2)(aa) and Section 16(2)(c) of the CGST Act, 2017, and Assan GST Act, 2017, before the Hon’ble High Court. The assessee argued that these provisions unjustly restricted input tax credit (ITC) by making it contingent on the selling dealer’s deposit of collected tax. Citing a prior ruling, the assessee contended that the department should recover unpaid tax from the defaulting selling dealer rather than deny ITC to the purchasing dealer. The revenue department did not object to applying the earlier ruling to this case.
High Court Held
The Hon’ble High Court held that Section 16(2) must be read down in line with the prior ruling, reaffirming that ITC cannot be denied due to the selling dealer’s failure to deposit tax. Instead, the department must pursue recovery from the defaulting seller. The court emphasized that burdening compliant purchasing dealers with such consequences is inequitable. Accordingly, the ruling favored the assessee, ensuring ITC entitlement despite the selling dealer’s non-compliance.
List of Cases Reviewed
- WP(C) 2863/2022, dated 5-8-202
- On Quest Merchandising India Pvt. Ltd. v. Government of NCT of Delhi & Ors., 2017 SCC OnLine Del 11286, relied on
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