The Allahabad High Court ruled that the input tax credit (ITC) cannot be denied to a dealer, solely because the supplier has subsequently cancelled its registration, more so where the supplier had filed returns and paid taxes through GSTR-01 and GSTR-3B.
The ruling came after finding that the petitioner was a registered dealer and had purchased goods from a registered supplier whose registration was cancelled only after the transactions.
A Single Judge Bench of Justice Piyush Agrawal observed that the supplier had filed returns and paid taxes through GSTR-01 and GSTR-3B, and thus, no adverse inference could be drawn merely based on the subsequent cancellation of registration.
The Bench held that the authorities failed to verify the factual position before initiating proceedings and acted solely on borrowed information. Accordingly, the initiation of proceedings and the impugned orders, being unjustified, are quashed.
Briefly, the petitioner, a proprietorship firm engaged in trading of Iron Scrap, had purchased goods from a registered dealer, M/s Arvind Metal Suppliers, through valid tax invoices and e-way bills for Rs. 10.83 lacs, including CGST and SGST of Rs 1.95 lacs, with payment made through banking channels. Despite the supplier filing GSTR-01 and GSTR-3B returns and paying tax, proceedings were initiated against the petitioner on the ground that the supplier’s registration was later cancelled. This resulted in the disallowance of the ITC and the imposition of tax and a penalty of Rs. 1.95 lacs.
Appearances:
Senior Advocate Suyash Agarwal, for the Petitioner/ Taxpayer
CSC, for the Respondent/ Revenue
