Jharkhand HC Acts Against Supplier for GSTR-1 Non-Filing and Non-Remittance of GST Collections

The Jharkhand High Court held that the State GST authorities are duty-bound under Section 76 of the Jharkhand GST Act (JGST), 2017, to initiate action against any person who collects tax but fails to remit it, regardless of whether the supplier is registered under the CGST or JGST.

Jurisdictional excuses or supplier defaults cannot result in the refusal of credit to the buyer who has filed the tax in good faith. The ruling furnishes the judicial prejudice for the supplier’s misrepresentation and departmental inactivity.

The applicant in the same case was in the transportation of coal and had rental/hiring of commercial motor vehicles from Respondent No. 6 (herein supplier) in FY 2020–21. The full invoice amount (₹73.34 lakh, including ₹11.17 lakh in GST) has been paid by the applicant via the banking channels. But GSTR-1 does not get furnished by the supplier; therefore, the ITC was not shown in the GSTR-2A, which causes the refusal of the credit to the applicant. There has been no action taken against the defaulting supplier even after the legal notices and representations have been sent to the tax department.

Whether against a supplier, the State GST authorities are liable u/s 76 of the JGST Act, 2017, to take action who collect tax but do not submit the returns and deposit the tax before the government, causing the ITC refusal to the receiver.

The court, while quoting Section 76(1) and (2), put an obligation on the proper officer to act against every person who collects tax, but losses to remit the same. The stand of the State GST department has been rejected by the court that it can not act due to the reason that the defaulting supplier was registered under CGST, not JGST, expressing that Section 76 covers such defaults and obligates action even against CGST-registered persons where tax dues impact the State exchequer, and the reason that the supplier comes under CGST jurisdiction was rejected as unsustainable.

The court held that the applicant specified that they had filed GST with supporting documents (invoices + bank statements). In the earlier writ (W.P. (T) 2665/2022), no merit adjudication emerged, which recommends applicant approach the authorities. When no decision has been made, it rejects the misuse of res judicata. Establishes the right to access judicial remedies in cases of tax injustice.

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U/s 76, the court asked the state tax authorities to start the proceedings in 8 weeks and levy Rs 1,00,000 as cost on the defaulting supplier to be filed to the applicant.