Priya Gupta

1. Whether ITC can be denied solely because the supplier’s registration was cancelled retrospectively for non-existence.

2. Whether ITC can be denied without examining the genuineness of the supplies and the appellant’s compliance with Section 16.

3. Whether denial of cross-examination vitiates the proceedings where a report of the supplier’s non-existence is the basis of denial.

4. Whether a Section 74 notice without foundational facts of fraud, collusion or suppression is valid, and whether it may be treated as a Section 73 notice under Section 75(2) (Para 22).

The power to cancel registration retrospectively does not mean that every consequence of cancellation can automatically be visited on every recipient; the transactions between supplier and recipient must be examined. Following Himalaya Communication and Jyoti Tar Products, the Tribunal held that the cancellation of a supplier registered for over a decade did not, without more, establish that the goods were not received or that the appellant participated in wrongdoing (Paras 23-26).

ITC is conditional under Section 16(2) and Rule 36, and the burden under Section 155 lies on the recipient, as recognised in Gobinda Construction and Ecom Gill Coffee Trading. But Section 155 does not permit rejection without examining the evidence: once the recipient produces evidence, the Department must verify it, as held in Shyamalmay Paul. Malik Traders, Trendships and Rajshi Processors were distinguishable because in those cases the evidence had been examined and found wanting; here no verification was done, and even the enforcement report was not supplied (Paras 27-35). The appellant’s further documents ought to have been produced earlier, but should be considered on redetermination (Paras 34, 49).

On cross-examination, neither Section 75(4) nor Section 136 creates the right; it is fact-dependent. Where the dispute can be resolved on invoices, e-way bills and transport records that the assessee can independently produce, its denial does not vitiate proceedings, as held in MNS Enterprises (Paras 36-38). On Section 74, the notice’s sole foundation — that the supplier was non-existent and the ITC therefore fake — was mechanical. Applying G.R. Infra Projects, Tata Steel, Safecon Lifesciences (where the Supreme Court dismissed the Revenue’s petition) and the CBIC circular dated 13.12.2023 discussed in Khurja Scrap Trading, the Tribunal held the notice invalid (Paras 39-44).

Under Section 75(2), a deemed Section 73 notice must itself satisfy the Section 73(2) time limit. With the Section 73(10) deadline for 2017-18 extended to 31.12.2023 by Notifications No. 13/2022-Central Tax and No. 09/2023-Central Tax, the last date for notice was 30.09.2023; the notice of 27.12.2021 was within time, as Circular No. 185/17/2022-GST also contemplates (Paras 45-48).