The dispute in M/s. D.Y. Beathel Enterprises v. State Tax Officer (Data Cell) arose after the petitioner, a registered dealer engaged in the business of Raw Rubber Sheets, purchased goods from two registered suppliers and paid the entire purchase consideration, including GST, through banking channels. Based on the tax invoices and the suppliers’ returns, the petitioner availed Input Tax Credit (ITC) under the GST law.

Subsequently, during departmental inspection, it was found that although the suppliers had collected GST from the petitioner, they had failed to remit the tax to the Government. Without first taking effective recovery action against the defaulting suppliers or examining them during the adjudication proceedings, the Department reversed the petitioner’s ITC and demanded tax, interest and penalty.