Supplier ordered to compensate assessee GST demand & penalty for ITC not reflecting

Supplier ordered to compensate assessee GST demand & penalty imposed upon him due to GST paid to supplier was not reflecting in form GSTR-3B of the assessee.

In a recent judgment, Hon’ble Allahabad High Court has ordered supplier to compensate and pay to the assessee/dealer the amount of GST demand and penalty imposed upon him due to GST paid to supplier was not reflecting in form GSTR-3B of the assessee.

ABCAUS Case Law Citation:
4489 (2025) (04) abcaus.in HC

In the instant case, the assessee had challenged the order passed by the GST Appellate Authority and order passed by Assistant Commissioner GST.

The petitioner was the head (Karta) of the Hindu Undivided Family, whose family was in possession and ownership of building in Noida, Gautam Buddha Nagar. The said property was a commercial four-storey building and the petitioner was in the business of renting out the said property.

The rent received from the said property, was taxable under the Goods & Services Tax Act, 2017 and therefore, the petitioner had filed its return. The petitioner, had paid one time lease rent to the New Okhla Development Authority (NOIDA) and also paid the GST @ 18% pursuant to which, the NOIDA issued a tax invoice to the petitioner.

The petitioner furnished his GST return under Section 39 of the CGST/UPGST Act. However, due to the mistake on the part of the NOIDA, the GST paid by it was not reflecting in the form GSTR-3B, despite the tax so deposited by the petitioner, was accepted by the NOIDA.

Subsequently, the proceedings were initiated against the petitioner under Section 61 of the CGST Act to which the petitioner submitted his reply and thereafter, the proceedings under Section 73 (1) of the CGST Act was initiated to which the petitioner also submitted a detailed reply supported by documentary evidence showing the payment of tax as well as acknowledgement receipt issued by the NOIDA, but without considering the same, the impugned order had been passed.

Appeal against the said order was also dismissed without considering the material available on record.

Before the Hon’ble High Court the Petitioner submitted that the NOIDA had accepted deposit of amount of tax by the petitioner and same had been deposited in some other head. It was submitted that once the NOIDA accepted the payment of tax, the petitioner cannot be penalized twice; once paying the tax to the NOIDA for depositing the same with GST department as per the law and other by facing penal proceedings under Section 73 of the GST Act whereby tax has again been imposed upon the petitioner of equal amount along with penalty.

The Petitioner submitted that the amount of tax and penalty imposed by the impugned order upon the petitioner may be directed to be paid/compensated by the NOIDA to the petitioner.

The counsel appearing for the NOIDA admitted that the amount was received towards from the petitioner towards the GST payment, but the same was deposited under some wrong head. He submitted that had the same was notified at the proper time, the same would have been rectified. He submitted that it’s the mistake on the part of the petitioner in not informing the respondent-NOIDA within time.

The Hon’ble High Court observed that undisputed fact was that the petitioner had paid the amount of GST to the NOIDA, which was required to be deposited with the GST Department. The payment of GST was deposited by the petitioner was accepted by it. However, GST amount was deposited under the wrong head. The NOIDA had attributed its mistake upon tax consultant by whom the advise was taken. In turn, the NOIDA accepted its mistake for non-deposit of the due tax so paid by the petitioner under the proper heads.

In view of the above facts, the Hon’ble High Court opined that petitioner cannot be permitted to suffer to the mistake committed on the part of NOIDA. The petitioner paid the legitimate tax to NOIDA, which was not deposited under the proper head and therefore, on account of that the petitioner had to face not only the proceedings of GST, but also imposition of penalty.

The Hon’ble High Court opined that in view of the facts and circumstances, the petitioner must be compensated by NOIDA.

Accordingly, the Hon’ble High Court directed NOIDA to pay/compensate the amount GST and Penalty demanded from the Petitioner and intimate about the same to the District Magistrate. The NOIDA was given liberty to recover the said amount from the erring officer of its department. In the event of failure of payment of compensation to the petitioner by the NOIDA, the District Magistrate was directed to recover the said amount from NOIDA and pay the same to the petitioner.

Download Full Judgment Click Here >>

• AO took a reasonable stand that 25 kg written in WhatsApp chat was 25 lakh – ITAT
• Shareholders can’t be taxed for income from properties owned by the company – HC
• Jurisdictional error in reassessment approval can’t be shielded by the law of limitation
• ITAT ought to remanded whole matter of bogus purchases instead of profit determination
• Where proceedings u/s 153C barred by limitation, AO can’t invoke section 148 & 148A