The Tribunal held that the Department failed to establish fraud, collusion, or fictitious transactions against the buyer merely because the supplier was later found non-existent.
The GSTAT Lucknow Bench has allowed the appeal of M/s M.K. Enterprises, an iron scrap dealer, setting aside the demand of ₹26,91,684 raised under Section 74 of the UPGST Act for alleged wrongful availment of ITC from a supplier that was subsequently found to be non-existent. [M.K. Enterprises v. Commissioner of State GST, Lucknow & Ors.]
Members Santosh Kumar Srivastava (Judicial) and Arvind Kumar (Technical) found that the Department had not produced cogent evidence establishing collusion, accommodation invoices, cash-back, circular trading, or knowing participation by the appellant in a fraudulent ITC arrangement. The purchases were supported by tax invoices, e-way bills, banking-channel payments, and were reflected on the GST portal.
The Tribunal placed significant reliance on the Allahabad High Court's decision in M/s Safecon Lifesciences Pvt. Ltd. — where the Supreme Court subsequently dismissed the State's SLP — holding that an adverse report regarding a supplier cannot substitute for proper examination of the recipient's contemporaneous evidence. Similarly, M/s Singhal Iron Traders and M/s Khurja Scrap Trading Company were cited for the proposition that subsequent cancellation or non-existence of a supplier cannot, by itself, justify denial of ITC.
The Tribunal also noted that the appellant had voluntarily reversed proportionate ITC under Rule 37 of the CGST Rules through DRC-03, demonstrating compliance with the statutory mechanism for non-payment within 180 days — a consequence governed by Section 16(2)(d), not Section 74.
2026-juristway.com-3030-GSTAT(Lucknow)-GST | GSTAT Lucknow | APL/25/LCK/2026 | 15.10.2026
