Input Tax Credit Cannot Be Denied Solely Due to Supplier's Retrospective Registration Cancellation Under GST Law

The HC set aside GST authorities' denial of Input Tax Credit to petitioners whose suppliers had registrations canceled retrospectively. The court remanded the cases for fresh consideration, directing the concerned officer to evaluate transaction genuineness, payment verification, and statutory compliance. The officer must determine if purchases were legitimate and made before supplier registration cancellations, comparing with relevant higher court precedents. If petitioners' case aligns with established precedents, ITC benefit should be granted. The respondents were ordered to dispose of the cases within eight weeks after providing petitioners an opportunity for hearing.

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Issues:

1. Denial of Input Tax Credit (ITC) by GST authorities.
2. Challenge to impugned orders under Section 79(1)(c) of the WBGST Act.
3. Genuineness of transactions and validity of suppliers.
4. Verification of identity of suppliers and compliance with statutory obligations.
5. Remand of cases for reconsideration by the concerned officer.

Analysis:

1. The petitioners filed writ petitions challenging the denial of Input Tax Credit (ITC) by the GST authorities based on the cancellation of registration of their suppliers with retrospective effect. The petitioners argued that the transactions in question were genuine and valid, supported by relevant documents. They contended that they had verified the genuineness and identity of the suppliers to the best of their ability, relying on the information available on the Government portal at the time of the transactions. The petitioners emphasized that they had paid for the purchases through banks and had limited means to ascertain the validity of the suppliers after the transactions were completed.

2. The petitioners also contested the impugned orders dated 29th March, 2022, and 30th March, 2022, under Section 79(1)(c) of the WBGST Act. They argued that they had fulfilled their obligations under the statute before entering into the transactions and that there was no failure on their part to verify the genuineness of the suppliers during the relevant period. The petitioners cited an unreported judgment of the Court in a similar case to support their contentions.

3. The Court considered the submissions of the parties and reviewed the records before setting aside the impugned orders. The cases were remanded to the concerned officer for a fresh consideration of the petitioners' entitlement to the benefit of input tax credit. The officer was directed to evaluate the documents presented by the petitioners to establish the genuineness of the transactions, verify if payments were made to the suppliers, and assess compliance with statutory obligations regarding supplier verification.

4. The officer was instructed to determine whether the purchases and transactions were genuine, supported by valid documents, and made before the cancellation of the suppliers' registration. The decision was to be based on a comparison with relevant judgments of higher courts and the specific circumstances of the case. The petitioners were to be granted the benefit of input tax credit if their case aligned with the established precedents.

5. The Court directed the respondents to dispose of the cases within eight weeks from the date of communication of the order, ensuring a reasoned and speaking order after providing an effective opportunity of hearing to the petitioners. The writ petitions were disposed of in light of the observations and directions provided, resulting in the setting aside of the impugned adjudication orders.

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