The Calcutta High Court has quashed an Order-in-Original and recovery notice against M/s Cart Infralog Ltd. on two independent grounds: first, that ITC cannot be denied to a bona fide recipient merely because the supplier defaulted in filing GSTR-3B or paying tax, where the conditions under Section 16(2)(a) and (b) are met and there is no allegation of collusion — following the binding Division Bench ruling in Suncraft Energy Pvt. Ltd. (affirmed by the Supreme Court on 14.12.2023); and second, that Section 74 of the CGST Act cannot be invoked mechanically — by inserting the words "fraud, wilful misstatement, suppression" without any material particulars — merely to overcome the three-year limitation under Section 73(10). The ruling, by Justice Smita Das De in WPA 16556 of 2025 (decided 27.08.2026), is one of the clearest applications of both these principles to a single case.
The facts: the petitioner had availed ITC from M/s Aster Trading Company and others for FY 2018-19 to 2019-20 and 2023-24. The Revenue discovered that Aster Trading Company had filed GSTR-3B only for January and February 2018 and had not filed returns for subsequent periods — meaning the ITC claimed in Aster's invoices was not reflected in GSTR-2A of the petitioner. The department had already initiated separate proceedings against Aster Trading for non-filing of GSTR-3B. Notwithstanding this, the Revenue issued an SCN on 11.06.2025 under Section 74 against the petitioner for the period 2018-19 to 2023-24, levying a total demand of Rs. 6.3 crore. A fresh Section 73 SCN for 2018-19 was time-barred (three years from the due date for annual return for FY 2018-19 had long passed). The department invoked Section 74 — which carries a five-year window — by alleging fraud and wilful misstatement.
On the ITC question, the court applied Suncraft Energy without hesitation. The Division Bench in Suncraft had held, following the Delhi HC in Arise India Ltd. (SLP dismissed by SC 10.01.2018), that where the recipient possesses a tax invoice from a validly registered supplier, has received the goods, and there is no allegation of collusion between buyer and seller, the department cannot deny ITC to the innocent purchaser merely because the seller defaulted on GSTR-3B. The correct remedy is for the department to recover from the defaulting supplier — not to deny the credit to a bona fide buyer. Here, the petitioner had tax invoices, e-way bills, transport receipts, proof of receipt of goods, and bank statements showing payment through banking channels. Conditions under Section 16(2)(a) and (b) were satisfied. The only dispute was under Section 16(2)(c) — actual payment of tax by the supplier. The department had admitted it was pursuing Aster Trading separately. Double recovery — once from the supplier under Section 79 and again from the innocent recipient — is impermissible.
On the Section 74 invocation, the court found it a colourable exercise of power. The SCN for FY 2018-19 was ex facie time-barred under Section 73(10). To get around this, the department had mechanically inserted allegations of fraud and suppression without setting out any particulars of how fraud was committed or how suppression was inferred. Applying the Supreme Court's ruling in G.R. Infra Projects Ltd. (which requires that Section 74 allegations must identify specific ingredients of fraud, wilful misstatement or suppression), the court found the SCN failed this test entirely. Extended limitation under Section 74 cannot be invoked as a substitute for limitation management. The OIO (passed on 09.12.2025 during the writ proceedings) was quashed along with the recovery notice, and the matter remanded with a direction to consider the binding precedents in Suncraft Energy and G.R. Infra Projects. A Rs. 10 lakh deposit under protest was directed as a condition for the remand.
2026-juristway.com-2361-HC(Calcutta)-GST | High Court of Calcutta | WPA 16556 of 2025 | 27.08.2026