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GST - Section 16(2) of the CGST Act, 2017 – Non-remittance of tax by supplier - notice seeking reversal of credit by invoking Section 16(2)(c) of the CGST Act - petitioner case said suppliers are delinquent insofar as that their registrations have been cancelled and the tax paid by the petitioner has not been remitted by the suppliers to the Department – HELD - Sub-section (2) of Section 16 sets out certain mandatory contingencies for continuity of ITC to a registered person and one of the conditions is that the tax charged in respect of such supply has been actually paid to the Government - there is a mandate cast upon the petitioner/claimant to ITC to ensure compliance with the provisions - the provisions of Section 16 are to be observed strictly, such that, there is no jeopardy to the interests of the revenue. The provisions of the CGST Act, 2017 has, assimilating wisdom of experience from the erstwhile tax regimes, gone one step further to ensure that the interests of the revenue are protected by providing for a mandate that the tax liability is met either at the hands of the supplier or the purchaser, the petitioner in this case. Thus, no fault can be attributed to the revenue in this regard – However, where the tax liability has been met by way of reversal of ITC and similarly recovery is effected from the supplier as well, this would amount to a double benefit to the revenue - thus, while the Department may reverse credit in the hands of the purchaser, this has to be a protective move, to be reversed and credit restored if the liability is made good by the supplier. Thus, the substantive liability falls on the supplier and the protective liability upon the purchaser. A mechanism must be put in place to address this situation – In this case, the procedure followed by the authority is contrary to the third proviso to Section 16 of the Act which necessitates that, where the authority proposes to take a view adverse to the applicant, due process must be followed - admittedly, there has been no opportunity granted to the petitioner prior to the passing of impugned order and this is a fatal flaw – impugned order is set aside - The petitioner shall be heard by issue of notice and orders passed on the Section 161 application – writ petition is allowed
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