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Registration of Supplier cancelled Retrospectively: ITC can not be denied merely on this ground held by Madras HC

In the Judgement of M/s.Engineering Tools Corporation, it was held by Hon'ble Madras HC has held that ITC can not be denied merely on the ground that the Registration of Supplier has been cancelled retrospectively. (Copy of Order is enclosed at the end)

Facts of the Case

The petitioner asserts that he had purchased goods from M/s. Shikhar Technologies in 2017-2018 and that such purchases are supported by tax invoices, e-way bills, transport documents and proof of payment to the supplier through regular banking channels.

ITC was reversed solely on the ground that the registration of the petitioner's supplier was cancelled with retrospective effect.

Department's Remarks in the Assessment Order

The taxpayer has made purchase from nonexistent person whose registration has been cancelled with retrospective effect on 03.11.2021. If SHIKHAR TECHNOLOGIES is a genuine Tax Payer, then ENGINEERING TOOLS CORPORATION should have filed the proof for the existence of SHIKHAR TECHNOLOGIES. Instead they have stated that they are purchasing goods from them and claimed ITC based on the purchase bills. Hence, it is proved beyond doubt that SHIKHAR TECHNOLOGIES is a Non-Existent dealer and issued fake invoices to the beneficiaries. In view of the above facts, the contention is not sustainable and it is overruled. Therefore the above proposal is hereby confirmed.

Hon'ble HC's key Observation

The Taxpayer purchased goods in 2017-2018 and, at the highest, the petitioner may be called upon to produce evidence of the existence of the supplier at the relevant point of time.

In addition, the petitioner may be called upon to prove that the transaction was genuine by providing relevant documents such as tax invoices, e-way bills, lorry receipts, delivery challans, proof for payment and the like.

Judgement of the High Court

Considering the facts of the case, the impugned assessment order is quashed and the matter is remanded for reconsideration. The assessing officer is directed to consider whether the transaction was genuine by examining all relevant documents in that regard.

The ITC claim shall not be rejected upon such reconsideration solely on the ground that the supplier's GST registration was cancelled with retrospective effect and a fresh assessment order shall be issued upon reconsideration, after providing a reasonable opportunity to the petitioner, within a maximum period of two months from the date of receipt of a copy of this order.

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Copy of the Order

HC Judgement
Download PDF • 253KB

Disclaimer: We have tried to simplify the Hon’ble Court Decision based on our understanding purely for academic purpose. In case, there is any mistake in understanding of the order, we are apologised to the Hon’ble Court.


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