Calcutta HC: ITC Can’t be Denied When Supplier GST Registration Cancelled
GST Revenue

The Calcutta High Court ruled that the department cannot deny Input Tax Credit (ITC) on genuine transactions with suppliers whose Goods and Services Tax (GST) registration was cancelled after the transaction.

The assessee was aggrieved by the department’s action of denying the benefit of the ITC and asked the petitioners to pay the interest and penalty under the GST Act. The department demanded the penalty and interest, stating that the supplier’s registration had been cancelled with retrospective effect and the retrospective period covered the transactions period.

The petitioner ​​contended that the transactions were genuine and valid. Also, he mentioned that they had verified the genuineness and identity of the suppliers. Moreover, the GST portal showed the names of such suppliers as registered taxable persons and showed that the registrations are valid and exist at the time of transactions.

The petitioners submitted that they have limitations in determining the genuineness and validity of the suppliers, and they have done whatever possible to validate the suppliers. The petitioner contended that the supplier’s names were already available on the GST portal as registered taxable persons during the relevant period of the transaction. Hence, the petitioners could not be faulted if the suppliers appeared to be fake later on.

The petitioners submitted that they paid the total purchase amount, including tax. The petitioner was helpless because the department mentioned that the suppliers were bogus and fake after the transactions were over. Based on this, petitioners filed a petition stating the department can not penalise without concrete materials.

The petitioners contended that all the purchaser’s data was available on the GST portal in GSTR-2A. The court stated that the petitioner couldn’t be held responsible after verifying the genuineness of the suppliers in available ways. Also, the court directed the department to dispose of the case by passing a reasoned and speaking order after giving an adequate opportunity of hearing to the petitioners within eight weeks.

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