Supplier's Retrospective GST Cancellation Not Enough To Deny ITC Without Verification: GSTAT Thane

The Goods and Services Tax Appellate Tribunal (GSTAT), Thane, on 22 October held that retrospective cancellation of a supplier's GST registration, by itself, does not justify denial of input tax credit (ITC) without independent verification of the transactions.

A Bench comprising Judicial Member Ramesh Nair and Technical Member Prallhad S. Paranjape set aside the orders denying ITC to Trivesh Enterprises LLP and dismissing its appeals for non-prosecution, directing the GST authorities to reconsider the matters on merits. It said:

“The Department cannot rely solely on the retrospective cancellation of the suppliers' registrations to confirm a demand without independently verifying the facts and giving the Appellant a fair, transparent opportunity to be heard.”

Trivesh Enterprises LLP had claimed ITC on purchases from suppliers whose GST registrations were subsequently cancelled retrospectively. The GST Department denied the credit on the ground that the suppliers were not genuine.

The company contended that the suppliers held valid GST registrations when the transactions took place and relied on invoices, bank payment records and e-way bills to substantiate its purchases.

The GST authorities rejected the claims, citing insufficient evidence of the actual receipt of goods. The first appellate authority subsequently dismissed the company's appeals for non-prosecution after it failed to attend the hearings.

The Tribunal found that the show cause notices did not clearly specify the allegations and that the original orders confirmed the demands without adequate reasoning.

Further, the Bench held that dismissing statutory appeals for non-prosecution was legally unsustainable. Under Section 107 of the Central Goods and Services Tax (CGST) Act, the appellate authority was required to examine the appeals on merits rather than dismiss them solely because the taxpayer failed to appear.

Accordingly, the GSTAT set aside the impugned orders and remanded the matters for fresh consideration, directing the GST authorities to provide a fair hearing, examine the supporting documents and pass reasoned orders. It left the question of the company's final eligibility for ITC open.

For the Appellant: Chartered Accountant Dimple Amit Soni

For the Revenue: Deputy Commissioner Parikshit Sawant