Penalty Imposed on Assessee for Transporting Goods Purchased from Supplier Who Was Set Up for Bogus ITC to Be Set Aside | HC

Case Details: Fairdeal Metals Ltd. v. Assistant Commissioner of Revenue, State Tax, Bureau of Investigation (NB) - [2024] 159 taxmann.com 158 (Calcutta)

Judiciary and Counsel Details

• • Amrita Sinha, J.
  • Sandip Choraria & Rajeev Parik for the Petitioner.
  • Subir Kr. Saha & Ms Rima Sarkar for the Respondent.

Facts of the Case

The petitioner was engaged in business of trading of goods. The department issued show cause notice to petitioner and mentioned that there was a need for physical examination of the goods and other verification of the documents produced before the proper officer. The notice further mentioned that the supplier from whom the petitioner procured the goods was found to have filed returns in GSTR-3B for the month of October and November, 2023 but on verification certain discrepancies were noticed.

Thereafter, the penalty was calculated and the petitioner was directed to show cause as to why the proposed tax and penalty should not be payable failing which further proceeding would be initiated. The petitioner filed writ petition and contended that there was no allegation against the petitioner but the entire allegation had been made against the supplier from whom the petitioner procured the goods. It was also submitted that the goods that were being transported did not have the coverage as per their GST registration and the supplier had deposited the input tax before issuance of show cause notice.

High Court Held

The Honorable High Court noted that the supplier was registered by the registered authority in Assam. Had there been any deficiency on the part of the supplier in production of relevant documents, registration ought not to have been issued. After registration has been issued and tax paid by the supplier, the allegation made against the supplier did not stand. Since the petitioner was no way connected with any of the allegations that had been levelled against supplier, it could not be made liable to pay penalty. Therefore, the Court held that the order of detention and the subsequent order imposing penalty were liable to be set aside and quashed.