Supplier’s Retrospective Cancellation Alone Cannot Justify ITC Denial or Section 74: GSTAT Cuttack

GSTAT Cuttack quashed a ₹8.95 lakh credit denial resting only on an enforcement report about a non-existent supplier, and directed fresh determination treating the notice as one under Section 73.

GSTAT Cuttack has held that the retrospective cancellation of a supplier’s registration cannot by itself prove that the recipient did not receive the goods, and that Section 74 cannot be invoked without foundational facts showing the recipient’s fraud or suppression. [Priya Gupta v. Avay Vincent Minz, Joint Commissioner of State Tax & Ors., 2026-juristway.com-3164-GSTAT(Cuttack)-GST]

The Bench of Suchismita Misra, Member (Judicial), and Ranjan Kumar Sahoo, Member (Technical), allowed the appeal against the order dated 31 Jul 2024 that confirmed denial of ITC of ₹8,95,252, an equal penalty and interest of ₹9,15,364.

The credit related to January 2018 purchases from M/s Annapurna Enterprises, whose registration was cancelled on 6 Jul 2019 after the enforcement wing found it non-existent. The appellant said the supplier filed returns and paid tax, the invoices appeared in GSTR‑2A, and payments were made through banks. The Department relied on Section 155 and State of Karnataka v. M/s Ecom Gill Coffee Trading Private Limited.

The Bench held that the power to cancel registration retrospectively does not mean every consequence falls on each recipient. Once the recipient produces evidence, the Department must verify it; here credit was denied purely on the enforcement report, which was not even supplied. It relied on Himalaya Communication Pvt. Ltd. vs. Union of India ((2025) 31 Centax 329 (H.P.)/2025 (99) G.S.T.L. 332 (H.P.)) and Shyamalmay Paul vs. Assistant Commissioner of State Tax ((2025) 32 Centax 375 (Cal.)).

Denial of cross-examination did not vitiate the proceedings, as the dispute could be resolved on documents. But the SCN invoked Section 74 mechanically. Citing Tata Steel Ltd. vs. Union of India ((2026) 45 Centax 361 (S.C.)) and the dismissal of the Revenue’s SLP in Additional Commissioner vs. Safecon Lifesciences Pvt. Ltd. ((2026) 45 Centax 232 (S.C.)), the Bench held that the foundational facts of fraud must appear in the notice itself.

Both orders were quashed. Under Section 75(2), the notice is deemed issued under Section 73(1), and the proper officer must decide eligibility on all evidence, including the appellant’s additional documents, without treating the cancellation as conclusive.

2026-juristway.com-3164-GSTAT(Cuttack)-GST