TaxTMI 
TaxTMI 
TaxTMI 
Any provision under any law applicable anywhere in India must be in a manner that facilitates the honest person to be safe and make only a dishonest person to suffer. At the same time, the law is expected to put conditions howsoever stringent it may be in such a manner that it is possible to comply with. Unfortunately, while implementing section 16(2)(C) of the CGST Act 2017, ITC is being denied even on the honest buyer for the default of the dishonest supplier, despite the fact that the buyer has absolutely no control on getting the details of payment made to Government by the supplier.
Though I have raised my voice earlier also on this issue, as nothing is happening, it is proposed to have more focus on this issue in this article which is dedicated to supplier default. Let us examine five different High Court views on this sub section as briefly as possible.
Story 1: The Allahabad High Court dealt this section on 30/05/2025 as gathered from 2025 (6) TMI 116. Period of dispute pertains to July 2017 to March 2018. Amount is significant. Seller is a Major Corporate Entity whose shares are widely held. Despite the taxpayer submitting evidences to prove that action is being taken against the seller by the Department, Additional Commissioner (Appeals) closed his eyes and closed his ears and passed order against the taxpayer. The high court in the matter of R T Infotech quashed both the OIO as well as OIA and ordered fresh reconsideration taking observations of the high court in to account.
Story 2: In this case it is partly related to supplier default as core issue is on 16(2)(aa). The Gauhati High Court on 09/12/2025 through the division bench headed by the Chief Justice has categorically held in paras 6 and 7 as :
“6. Looked at from another angle, denying the ITC to a buyer of goods or services for default of supplier of goods and services would amount to shifting the incidence of tax from the supplier to the buyer which is unconstitutional and against the scheme of CGST Act and AGST Act. A buyer of goods or services would have to pay GST twice on the same transaction; once at the time of purchase of the goods by paying GST to the supplier and secondly, on disallowance of the ITC.
7. The objective of the CGST Act and the AGST Act is to charge tax only on “value additions” and to avoid a cascading effect of taxes.”
As the above two observations are self-explanatory, kindly refer to 2025 (12) TMI 756 in the matter of Mclead Russel India Limited for full story.
Story 3: It is yet another case on identical issues. The Calcutta High Court on 06/08/2025 examined this issue in the matter of Rabin Sarkar who has paid GST as receiver promptly. Even after furnishing all the relevant information to prove the genuineness GST was recovered and even the first appellate authority did not come forward to rectify this defect. The High court held that
7. As such, while setting aside the order dated 12th November 2024, I remand the matter back to the appellate authority. Recovery already made by the appellate authority shall be recredited to the petitioner’s credit ledger forthwith in any event, not later than two weeks from the date of communication of this order. For complete story, kindly refer to 2025 (8) TMI 1289.
Story 4: This is a real story as well as a classic judgement. The registration of supplier was cancelled subsequent to transactions. Revenue denied ITC, not bothering to go in depth on issues. The Allahabad High court on 03/12/2025, relying on a decision of the Apex court ruled as under:
15. Further, the Apex Court recently in the case of Shakti Karan India Ltd. - 2025 (10) TMI 607 - SC Order on 9th October, 2025 has categorically held that on the date of transaction the selling dealer was registered. Neither the transaction nor the invoice in question can be doubted and ITC should have been granted. Similarly, in the case of M/s Safecon Lifescience Pvt. Ltd. vs. Additional Commissioner Grade 2 and another [2025 (9) TMI 919 - ALLAHABAD HIGH COURT] this Court has taken the similar view. Further the judgment relied upon by the revenue is not of any aid as the case in hand, all the documents were on record. Moreover, the payment of tax made by the petitioner to its selling dealer have already been deposited with the revenue and the same has not been disputed at any stage.
16. In view of the aforesaid law laid down by the Apex Court, the impugned order cannot be sustained and are hereby quashed.
17. The petition is Allowed.
Kindly refer to 2025 (12) TMI 441 for full story. On identical issues, reliance may be placed on this case law.
Story 5: This is the most interesting story amongst all five. The Allahabad High court on 04/11/2025 had the occasion in the matter of writ tax Number 1357 of 2022 - 2025 (11) TMI 249 - ALLAHABAD HIGH COURT to deal this case where buyer was not at default and the seller as well. GSTR 1 and GSTR 3 prove genuineness. Only because the registration of suppler was cancelled subsequently, the buyer was harassed. The observations of the High Court on Singhal Iron Traders case are as below:
13. It was the duty of the authorities to verify the said information as to whether at the time of transactions, the firm was in existence or not, and therefore, without verifying the same, the authorities ought not to have initiated the proceedings against the petitioner only on the borrowed information as the petitioner discharged its preliminary duty by making the payment of due taxes through banking channels.
14. Further, it is not the case of the revenue that the vehicle used for transportation was not found registered and therefore, the initiation of proceedings against the petitioner cannot be said to be justified and are liable to be quashed by this Court.
15. In view of the above facts as stated, the impugned orders cannot be sustained in the eyes of law and the same are hereby quashed.
16. Accordingly, the writ petition is allowed.
Conclusion: Tremendous efforts are put from myside to create awareness amongst all concerned with GST. Let us hope that this message reaches at least a few tax officials through the dealing tax professionals.