HC: Purchasers are Only Liable for Verifying that the Seller is Registered for GST on Portal

The assessee is simply accountable for proving that he legitimately acquired the goods from the supplier for a fair price after checking the supplier GST registration on the GST portal, held by Hon’ble Andhra Pradesh High Court in M/s Arhaan Ferrous and Non-Ferrous Solutions Pvt. Ltd. v. Deputy Assistant Commissioner [Writ Petition No.15481 of 2023 dated August 03, 2023].

Attributes:

M/s. Arhaan Ferrous and Non-Ferrous Solutions Pvt. Ltd. (“the Petitioner”) is a trader in iron scrap and Mr. T. Srinivasulu (“The Transporter”) is the vehicle’s owner where the applicant transported iron scrap.

From M/s. K.S. Enterprises (“the Supplier”) located in Vijayawada the Petitioner purchased the iron scrap (“the Goods”) and then sold it to M/s Radha Smelters Private Limited (“the Buyer”) located in Sankarampet under the valid GST invoice number.

The petitioner hired the transporter to move the goods from Vijayawada to Sankarampet with all the necessary legal paperwork, including an invoice, a waybill, a weighing slip, etc.

On the grounds that the supplier does not have a place of business in Vijayawada, the Revenue Department (“the Respondent”) held the goods while they were in transit and commenced legal action against the supplier in accordance with Section 130 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).

The petitioner argued that the respondent purposefully disregarded the documentation provided during the check, proving the petitioner was the rightful owner of the items. According to Section 129 of the CGST Act, legal action may be taken against the person conveying the goods, in this case, the Petitioner.

The Respondent has served notice against the Supplier, who has no interest in the case after selling the consignment to the Petitioner for a substantial price, rather than bringing proceedings in the name of the Petitioner.

Also argued that there was no obligation for the Petitioner to confirm that the Supplier has a registered place of business in Vijayawada under the GST statute. The petitioner has correctly confirmed the supplier’s GST registration and has paid the consideration via bank account. However, the transaction that the Petitioner and the Supplier engaged in is unrelated to the Respondent’s reservations about the validity of the registration of the Supplier.

Problem:

Can the Revenue Department seize the Assessee’s goods based on the legal action taken against the Assessee’s supplier?

Held:

The Hon’ble Andhra Pradesh High Court Writ Petition No.15481 of 2023 is held as under:

• Having said that, it is clear that, in breach of the CGST Act’s requirements, legal action could get taken to have goods seized at the time when they are in transit. Given the Supplier’s absence from the provided address and lack of a place of business there, the Respondent may in the present situation bring legal action against him under Section 130 of the CGST Act. The Petitioner’s goods, however, cannot be seized by the Respondent just because they were purchased from the aforementioned Supplier.
• Remarking that the physical existence of the aforesaid supplier is in conflict, it must be cited that the petitioner’s allegation of the purchase of products is very improbable. As a result, the Respondent may bring legal action against the Petitioner under Section 129 of the CGST Act and undertake an investigation while giving the Petitioner the chance to present their position.
• The Respondent will discharge the impounded goods in the petitioner’s favour in exchange for a deposit of 25% of the value of the goods and the execution of a bond for the remaining amount. The Respondent shall indeed release the vehicles in the transporter’s favour.
• It was decided that the applicant’s burden would be restricted to proving that he had legitimately brought the goods via the Supplier for an appropriate price after reviewing the supplier’s GST registration on the GST portal.