2026-VIL-254-GSTAT-CTT
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SGST Tribunal

GST - Denial of input tax credit solely on retrospective cancellation of the supplier's registration - Section 29 of CGST Act, 2017 – Appellant availed input tax credit on invoices of a supplier whose registration was cancelled retrospectively after a report of the enforcement wing found the supplier non-existent - ITC was disallowed under Section 74 on the allegation of supply without goods - Whether input tax credit can be denied solely because the registration of the supplier was cancelled retrospectively on the ground of non-existence - HELD - Section 29(2) empowers the proper officer to cancel registration with retrospective effect, but this does not mean that every consequence can be imposed on every recipient who purchased from that supplier. The supplier had held valid registration for over a decade, issued invoices and filed returns, and retrospective cancellation does not without further examination establish that the goods were not received – The ITC cannot be denied on this sole ground without examining the genuineness of the transaction and the movement of goods - Retrospective cancellation of the supplier's registration alone cannot be treated as sufficient proof to deny credit without examination of the underlying transactions and the applicable conditions – Ordered accordingly - Conditions for input tax credit under Section 16(2) and burden of proof under Section 155 of CGST Act, 2017 - Duty of the Department to examine evidence of genuineness of supply - Whether credit can be denied without independently examining the genuineness of the supplies and compliance with Section 16 - HELD - Credit is not an absolute right, and the entitlement depends on strict compliance with the conditions in Section 16(2), including possession of the tax invoice, receipt of goods, payment of tax to the Government and filing of returns, with the burden under Section 155 lying on the recipient. This does not permit the Department to reject a claim merely by citing Section 155 and the retrospective cancellation without examining the evidence. Once the recipient produces proof of genuineness and receipt of goods, the burden shifts to the Department to verify and either allow or disallow the credit - The decisions relied upon by the Respondent are distinguishable as the documents there were dubious or absent, and here the authorities denied credit on the basis of a report of non-existence without verification, and did not even supply a copy of the report - The non-speaking orders of the adjudicating authority and the FAA cannot be sustained in law and set aside - Denial of cross-examination in adjudication where the case rests on a report of non-existence of the supplier - Principles of natural justice under Section 75(4) of CGST Act, 2017 - Appellant contended that its request for cross-examination of the officers who found the supplier untraceable was denied, while the Respondent denied that any specific request was made - Whether denial of cross-examination violates natural justice and vitiates the proceedings - HELD - The Act does not provide for cross-examination during adjudication, as Section 75(4) provides only for an opportunity of hearing and Section 136 deals with relevancy of statements, and the right has been shaped by judicial pronouncements - Where the allegation is that credit was availed without genuine supply, it can be countered by producing documents such as invoices, e-way bills and transportation records, and mere denial of cross-examination does not vitiate the proceedings,. The dispute being capable of resolution by independent documentary proof, cross-examination is not a substitute for proving receipt of genuine supplies through primary records - The contention that denial of cross-examination violated natural justice is rejected - Validity of SCN under Section 74 of CGST Act, 2017 without foundational facts of fraud, wilful misstatement or suppression - Whether the notice under Section 74 is valid in the absence of foundational facts and proof of fraud or suppression - HELD - The SCN stated only that since the supplier was non-existent the credit was fake, and Section 74 was invoked mechanically without indicating grounds or any effort to ascertain deliberateness on the part of the Appellant - Mala fide intent must be proved on actual evidence and not on presumption, and the onus lies on the Respondent to lay out facts and cogent reasoning. The allegations leading to the inference of fraud or suppression must emanate from the notice itself and the words cannot be mechanically use - The SCN was vague, mechanical and uncorroborated, and the authorities passed orders mechanically - The entire proceedings under Section 74 are unsustainable and the orders are quashed - Deeming of SCN under Section 74(1) as issued under Section 73(1) by virtue of Section 75(2) of CGST Act, 2017 - Respondent prayed that if the notice under Section 74 fails, the tax liability be determined as if the notice were issued under Section 73 - The invoices related to the financial year 2017-18, and the SCN was issued before the extended due date under Section 73(2) read with the notifications extending the time limit under Section 73(10) - Whether Section 75(2) is attracted to deem the notice as issued under Section 73(1) - HELD - Section 75(2) applies where the Tribunal concludes that the charge of fraud, wilful misstatement or suppression is not established, and the proper officer then determines the tax as if the notice were issued under Section 73(1). Since the notice must be within the limit prescribed under Section 73(2) read with the extension notifications, and the notice was issued well before the extended date, the SCN falls within limitation for deeming under Section 73 - The SCN is deemed to be issued under Section 73(1), and the proper officer shall determine the eligibility of credit after considering all evidence including the additional evidence on genuineness of transaction, giving an opportunity of hearing, without treating retrospective cancellation as conclusive proof of non-receipt of goods.
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