The Principal Bench held that a buyer who has done everything the law requires on the date of purchase holds his credit regardless of what the Department may later decide about his supplier's registration, and that the retrospective cancellation may be a reason for the Department to enquire but cannot be treated as the conclusion of the enquiry.
The Goods and Services Tax Appellate Tribunal, Principal Bench at New Delhi, has dismissed a departmental appeal and confirmed the setting aside of a demand of ₹37,184 in ITC along with penalty, holding that the sole ground of retrospective cancellation of the supplier's registration cannot sustain a denial of credit where all conditions under Section 16(2) are satisfied [Ram Manohar Meena v. SRH Technologies].
The respondent, a proprietor dealing in computer systems, had purchased laptop computers from a registered supplier under five tax invoices in September-October 2018, each invoice describing the goods by model and serial number. The respondent had the invoices, the entries appeared in GSTR-2A (because the supplier reported these sales in its own GSTR-1), payment was made through banking channels, and the returns were filed. The supplier's registration was subsequently cancelled retrospectively from 1 July 2017 — over a year after the transactions. The Superintendent raised a demand under Section 73 solely on the ground that the supplier's registration stood cancelled from the date of registration, relying on CBIC Instruction No. 02/2022-GST. The First Appellate Authority set aside the demand, and the Department appealed.
The Bench of Arun Kumar Singal (Judicial Member) and Sanjeev Kumar Jain (Technical Member) delivered a comprehensive 19-paragraph order. On Section 16(2)(a), the Tribunal held that the requirement is of an invoice "issued by a supplier registered under this Act," and the natural meaning is that the supplier must be registered on the date the invoice is issued. On each of those dates, the supplier held a valid GSTIN on the common portal. A buyer can know his supplier's status only from what the portal shows. Section 29 empowers retrospective cancellation but only as between the Department and the registrant — it does not say that every invoice issued in the interim is to be treated as never issued, and the statute contains no provision withdrawing credit from those who bought from the supplier. The Tribunal held that CBIC Instruction No. 02/2022-GST, being a standard operating procedure for scrutiny, cannot add to Section 16 a disqualification that the section does not contain — "a flag raised in scrutiny is the beginning of an enquiry, not the conclusion of one."
On Section 16(2)(c), the Department's representative admitted at the hearing that the supplier had deposited the tax but was "not sure" whether the respondent's credit corresponded to that deposit. The Tribunal held that a demand cannot be founded on the Department's own uncertainty about its own records. The supplier's GSTR-3B for the relevant months was filed, and a GSTR-3B cannot be filed without discharging the liability declared in it. Neither the show cause notice nor the adjudication order alleged non-payment of tax by the supplier. The Tribunal also noted that under Section 75(7), a demand raised on the ground of retrospective cancellation cannot be defended on the different ground that the supplier "may not have" paid tax — especially when that ground is put forward as doubt and not as fact. The Tribunal concluded by recording that the reviewing authority had filed the appeal despite the amount being below ₹50,000, causing "unnecessary harassment" to the taxpayer through "avoidable litigation."
2026-juristway.com-2920-GSTAT(New Delhi)-GST | GSTAT New Delhi (Principal Bench)
