Supplier’s Retrospective GST Cancellation Alone Isn’t Enough to Deny ₹8.95-Lakh ITC; GSTAT Orders Eligibility Review Under Section 73

01Facts

The Appellant claimed input tax credit (ITC) of ₹8,95,252 for goods allegedly purchased in January 2018 from M/s Annapurna Enterprises.

¶ 1–2

The department alleged that the supplier was non-existent and that the Appellant had claimed ITC against invoices unsupported by actual supply.

¶ 1–2

A notice under Section 74 of the CGST/OGST Act was issued on 27 December 2021; the adjudicating authority disallowed the credit and imposed interest and penalty, and the first Appellate Authority upheld that decision on 31 July 2024.

¶ 1–2

The Appellant maintained that it had received the goods and relied on invoices, e-way bills, payment records, stock records and other documents.

¶ 3–11, 23–25, 34–35

The Tribunal noted that the supplier’s registration had been cancelled retrospectively and that the authorities had not independently examined the underlying transactions.

¶ 3–11, 23–25, 34–35

02Issues

i.1. Whether ITC could be denied solely because the supplier’s registration was cancelled retrospectively on grounds of non-existence.

¶ 22(i)

ii.2. Whether ITC could be denied without independently examining the genuineness of the supplies and the Appellant’s compliance with Section 16.

¶ 22(ii)

iii.3. Whether denial of cross-examination violated natural justice where the supplier’s alleged non-existence formed the basis for denying ITC.

¶ 22(iii)

iv.4. Whether the Section 74 notice was valid in the absence of foundational facts establishing fraud, collusion or suppression with intent to evade tax.

¶ 22(iv)

v.5. Whether the Section 74 notice could be treated as a notice under Section 73 by operation of Section 75(2).

¶ 22(v)

03Law Applied

Section 16 of the CGST/OGST Act makes ITC conditional on compliance with the applicable statutory requirements, including possession of prescribed documents, receipt of goods or services and payment of the tax to the Government; under Section 155, the claimant bears the burden of proving ITC eligibility.

¶ 28–32

Retrospective cancellation of a supplier’s registration, by itself, does not establish that the recipient did not receive the goods or participated in wrongdoing; the transaction and statutory conditions must be examined.

¶ 24–26

Section 74 applies where wrongful ITC results from fraud, wilful misstatement or suppression of facts to evade tax, and the notice must disclose the foundational facts supporting that allegation.

¶ 39–44

Under Section 75(2), where a Section 74 notice is found unsustainable because fraud, wilful misstatement or suppression has not been established, the proper officer must determine the tax payable as if the notice had been issued under Section 73(1), subject to the applicable limitation provisions.

¶ 45–48

The Tribunal also considered Andaman Timber Industries v. Commissioner of Central Excise on cross-examination and held that denial of cross-examination is not automatically fatal where the dispute can be answered through documentary evidence.

¶ 36–38

Provisions in the judgment · 19 · Linked ones open on LawLens

Central Goods and Services Tax Act, 2017 17 provisions

Section 16 Section 29 Section 31 Section 34 Section 37 Section 38 Section 39 Section 41 Section 49 Section 50 Section 73 Section 74 Section 75 Section 112 Section 136 Section 155 Section 168

West Bengal Goods And Services Tax Act, 2017 Section 74

BIHAR GOODS AND SERVICES TAX ACT, 2017 Section 16

04Reasoning

The Tribunal found that the authorities had treated the supplier’s retrospective registration cancellation and an enforcement report as conclusive, without verifying whether the Appellant had received the goods or met the conditions for ITC.

¶ 24–26, 34–35

Although the Appellant’s asserted supporting documents required verification and did not, by themselves, resolve entitlement to credit, the authorities had not adequately examined them; retrospective cancellation alone could not justify denial.

¶ 24–26, 34–35

The Tribunal rejected the cross-examination ground as independently sufficient to invalidate the proceedings because the dispute could be addressed through primary documentary evidence.

¶ 36–38

It held that the Section 74 notice mechanically alleged that the credit was “fake and fabricated” without setting out evidence of the Appellant’s fraud, wilful misstatement or suppression.

¶ 40–44

Because the notice was issued within the applicable time limit for the relevant 2017–18 period, the Tribunal considered Section 75(2) applicable.

¶ 46–49

05Holding

The Tribunal held the Section 74 proceedings unsustainable and quashed the adjudicating authority’s order dated 31 May 2022 and the first Appellate Authority’s order dated 31 July 2024, with consequential benefit to the Appellant.

¶ 44, 50(i)

It directed that the Section 74 notice be deemed to have been issued under Section 73(1), and that the proper officer determine ITC eligibility in accordance with law, after hearing the Appellant and considering the evidence, including the additional documents.

¶ 49–50(ii)

The officer was directed not to treat retrospective cancellation of the supplier’s registration, by itself, as conclusive proof that the goods were not received.

¶ 49–50(ii)

The appeal was allowed and disposed of on those terms.

¶ 50(iii)

LawLens.GSTAT - ['Cuttack']

Original Court PDF