TaxTMI 
TaxTMI 
TaxTMI 
The tax officers who think differently and pass orders based on their assumptions and presumptions may kindly explain the provisions based on which such orders are passed so as to know better the exact legal background. There were several orders passed by adjudicating authorities across India who passed orders denying ITC due to suppliers default. This order goes one step forward and ITC was denied for the default of supplier’s supplier.
The Allahabad High Court had an occasion to examine one such case on 09/09/2025 in the matter of M/s Safecon Lifescience Private Limited Versus Additional Commissioner Grade 2 And Another - 2025 (9) TMI 919 - ALLAHABAD HIGH COURT. Interstingly, when the petitioner established that all payments due to supplier were made in time and the supplies were received, department took the stand that the supplier’s supplier defaulted and hence ITC is not available for the petitioner.
The moment it is established that goods are received by the receiver and all payments are duly paid to supplier, it is only the department which can ensure that the applicable taxers are duly collected from the supplier as the receiver has no control of whatsoever on this. This being so, the receiver even do not know who supplied the goods to the original supplier as this is irrelevant for the receiver.
The petitioner bought goods on 30/04/2021 and receipt of goods and payment to supplier as well as reflection in 3B of supplier were established. However, adjudicating officer did not consider those submissions and held that ITC is not eligible. When an appeal was preferred against the order before additional commissioner (appeal), the appeal was dismissed on 20/12/2022 on the novel ground that few of the supplier’s supplier defaulted even without establishing such facts.
The High Court has went depth in to the matter and passed order by holding that both the orders passed by GST Authorities cannot be sustained and accordingly quashed both the orders. Three important paragraphs of the order dated 09/09/2025 are reproduced for bringing awareness amongst all concerned.
12. Once actual movement of goods as well as payment of tax by the respondent authorities have been proved by the petitioner to which no rebuttal has been brought on record at any stage, proceedings under section 74 of the Act cannot be justified.
13. The order of the first appellate authority has been passed only on the basis of the information sent by office of the Pr. Chief Commissioner, Central Intelligence Unit, Central Excise & Central Tax Vadodara Zone with closed eyes. The information sent by the Central Intelligence Unit must be verified by the authority before using the same against the registered dealer.
15. GST regime has been brought by the Central Government for ease of business in the country but the revenue officers are bend upon to act against the very theme/ intend of it. When it was noticed by the Government that under the garb of Section 74 of the Act various dealers are being harassed, issued a circular dated 13.12.2023 where it has specifically been stated that proceedings under section 74 of the Act can be initiated if there is a fraud or willful mis-statement or suppression of fact to evade payment of tax and not otherwise.
It is high time that CBIC may come out with a new set of instructions to the field formation across India for avoidance of passing this kind of orders which is not only a futile exercise for the department but also shows the quality of orders being passed without relying on the legal provisions.