Calcutta HC: Petitioner Not Liable for Penalties in ITC Case

Key Points:

1. Case Overview: The Calcutta High Court ruled in the case of Fairdeal Metals Ltd. v. Assistant Commissioner of Revenue, State Tax, Bureau of Investigation.
2. Background: Fairdeal Metals Ltd. purchased goods from M/s Navaraj Trading Company, a recently registered supplier in Assam under the CGST Act. However, certain discrepancies arose regarding the supplier’s GST registration and the nature of its business premises.
3. Show Cause Notice: Fairdeal Metals received a Show Cause Notice in December 2023, alleging irregularities in the Supplier’s GST filings and the transportation of goods.
4. Penalty Imposition: Despite the Supplier rectifying the discrepancies by paying the Input Tax Credit (ITC) before the Notice was issued, Fairdeal Metals was penalized, and its goods were detained by the Revenue Department.
5. Legal Proceedings: Fairdeal Metals challenged the Impugned Order through a writ petition, arguing against the penalty imposition.
6. Court’s Decision: The Calcutta High Court observed that since the Supplier rectified the irregularities by depositing the ITC before the Notice, Fairdeal Metals could not be held liable for penalties related to the supplier’s actions.
7. Implications: This ruling emphasizes the importance of promptly rectifying irregularities and the need for clear evidence linking a petitioner to supplier wrongdoings.
8. Legal Context: Section 130 of the CGST Act addresses the confiscation of goods and penalties for tax evasion, highlighting the legal framework surrounding such cases.

Conclusion:

In essence, the judgment in the Fairdeal Metals case underscores the principle that a petitioner should not be penalized for a supplier’s wrongful actions, especially when the supplier promptly rectifies the irregularities. This ruling prompts businesses to carefully navigate GST compliance and underscores the importance of establishing clear links between petitioners and supplier actions.

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