Know Your Limits. Part 9. ( A series under GST)

Today, I had an occasion to go through a case law dated 18/08/2025 passed by Allahabad High Court. I noticed that a show cause notice was issued under Section 74 only on the sole ground that the suppliers GST Registration was cancelled after the date of supply and hence ITC was wrongly availed based on paper transaction without actual supply of goods.

All arguments of the petitioner including proof for movement of goods, though taken on record were not considered by both the adjudicating officer as well as the first appellate authority and order was passed denying the ITC.

Left with no option, the petitioner approached the jurisdictional high court seeking required relief. The high court examined this issue at length and concluded on the basis of documents submitted that both the officers erred in passing the respective orders and set aside the both the orders granting relief to the petitioner. The issue is closed as the case was not remanded but concluded.

The entire case has been built  by GST authorities on the ground that the supplies took place on 20/06/2018 and the supplier registration was cancelled subsequently on 28/09/2018. Since the supplier registration was cancelled, the transaction that took place on 20/06/2018 was only a paper transaction and there was no need to refer to any documents. The petitioner produced several documents before adjudicating officer as well as first appellate authority such as e way bill, GST Invoice, ledger abstract of seller, bank statements as well as copy of GSTR 2A. Though everything was taken on record, to utter surprise, authorities held the transaction as a paper transaction and passed orders accordingly.

As a matter of abundant caution, notice was issued under Section 74 on 07/09/2022 though there was no need to invoke 74 as section 73 itself is applicable as on that date. Order In Original was passed on 17/11/2023 confirming denial of ITC. The appeal also failed as Order In Appeal passed on 24/12/2024 rejected the appeal.

Interestingly, e way bill was stamped by tax authorities on 21/06/2018 by intercepting GST officials which has helped the petitioner to prove that movement of goods took place.

The operative portion of the Allahabad High Court is furnished as passed by the court

11. Once on the date of transaction the seller was having a valid registration and the transaction was through a valid billing channel, which has neither been denied nor any adverse material has been brought on record, no adverse inference can be drawn against the petitioner.

12. In view of the above, the impugned orders cannot be sustained in the eyes of law and are hereby quashed.

13. The writ petition stands allowed.

14. Any amount deposited during pendency of the present litigation shall be refunded to the petitioner within a month from the date of presentation of a certified copy of this order.

Case Details: M/s Kesarwani Traders Versus State of Up And 3 Others - 2025 (8) TMI 1132 - ALLAHABAD HIGH COURT

Conclusion: This article is written to create awareness amongst all concerned that the orders as well as appeal orders must be based on the law as well as the facts and documents furnished. The Tax Officials have the rights to reject documents only with proper justification for such rejection and resist from passing similar orders once the same is quashed by the jurisdictional High Court in the interest of Justice.