In a significant pronouncement on November 6, 2023, the Hon’ble Supreme Court addressed a crucial GST compliance matter in the case of Deputy Assistant Commissioner-1 (ST) v. Arhaan Ferrous and Non Ferrous Solutions (P.) Ltd. The apex court declined to intervene in a case where the Andhra Pradesh High Court had ruled on the responsibilities of an assessee in the context of purchasing goods and ensuring compliance with GST regulations.
Background:
Arhaan Ferrous and Non-Ferrous Solutions Pvt. Ltd. (“the Respondent”) found themselves in a legal quagmire as the Revenue Department (“the Petitioner”) detained their goods in transit. The allegation was that the supplier of the iron scrap, M/s. K.S. Enterprises, had no business premises in Vijayawada. This prompted the initiation of proceedings under Section 130 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).
The Respondent argued that the Petitioner had overlooked valid documents, including an invoice, E-way bill, and weighment slip, proving the legitimacy of their ownership of the goods. Section 129 of the CGST Act allows action against the person transporting goods, in this case, the Respondent. However, the Petitioner issued a notice against the Supplier, who had no stake in the matter after selling the consignment to the Respondent.
Andhra Pradesh High Court’s Decision:
The Andhra Pradesh High Court acknowledged the Petitioner’s right to initiate proceedings against the Supplier under Section 130 of the CGST Act. However, it ruled against the confiscation of the Respondent’s goods solely based on the grounds of their purchase from the said Supplier. The court held that the Petitioner could proceed under Section 129 of the CGST Act against the Respondent, allowing an inquiry with an opportunity for the Respondent to establish their case.
The High Court directed the release of the detained goods on the condition that the Respondent deposit 25% of the goods’ value, execute a bond for the remaining amount, and release the vehicles to the transporter. The Respondent’s responsibility was limited to proving the bona fide purchase of goods from the Supplier after verifying the GST registration on the portal.
Supreme Court’s Disposition:
Aggrieved by the High Court’s order, the Petitioner filed a Special Leave Petition (SLP) before the Supreme Court. However, the apex court, in its decision dated November 6, 2023, expressed no inclination to interfere in the matter, resulting in the dismissal of the SLP. Consequently, the case was disposed of.
Conclusion:
The Arhaan Ferrous case serves as a crucial precedent, emphasizing the responsibilities of an assessee in the face of GST compliance challenges. The Andhra Pradesh High Court’s nuanced ruling, upheld by the Supreme Court’s decision to refrain from interference, highlights the importance of procedural fairness and the need for authorities to adhere to the established legal frameworks. As businesses navigate the complex landscape of GST regulations, this case underscores the significance of due process and the burden of proof in establishing bona fide transactions in the GST regime.
