DENIAL OF ITC DUE TO SUPPLIERS REGISTRATION HAS BEEN CANCELLED UNDER SECTION 29(2)(e)

[Mehul Pandya]

DEAR EXPERT,

MY QUERY IS UNDER.

I am manufacturing firm. I am purchasing raw material from different suppliers. Sometimes we are purchasing from agents. So we dont know the supplier personally. We have received 3 different DRC-01 for the F.Y. 2018-19 stating that suppliers registration cancelled suo moto. hence ITC need to reverse. initially they have issued summon to us and we have supplied documents as they required. but off the record, they told us that when ever any suppliers GST number cancelled we demand ITC from the receipient too. in one notice they even not issued DRC-01A. We have documents like invoice, E-way bill, payment proof. What can be done in this case.

AI Summary

Denial of input tax credit can be contested when supplier registration was live; preserve invoice, e way bill and payment proofs.
Denial of input tax credit is contestable where the supplier's registration was live at the time of purchase; the recipient should preserve tax invoices complying with Rule 46, e way bills, payment proofs, delivery acknowledgements, and proof of physical movement to substantiate entitlement under Section 16. Allegations of supplier fraud under Section 29(2)(e) shift the dispute into evidence-focused litigation, with the department bearing the burden to prove fraud while Rule 86A may also be implicated.