ITC Cannot Be Denied Due to Supplier’s Subsequent Default { Additional Commissioner Grade 2 & Anr. v. M/s Safecon Lifescience Pvt. Ltd. SLP (C) No. 023993 of 2026}
Facts :
GST Department initiated proceedings under Section 74 of the CGST Act and denied the taxpayer’s Input Tax Credit on the ground that the supplier’s GST registration was subsequently cancelled. The taxpayer established that the purchases were genuine, supported by valid tax invoices, e-way bills, transport documents, payment through banking channels and GST returns.
Issue
Whether ITC can be denied under Section 74 merely because the supplier’s GST registration was cancelled subsequently, despite the recipient having genuine transactions and valid supporting documents.
Held
The Allahabad High Court held that Section 74 cannot be invoked merely because of doubts regarding the supplier or its upstream transactions. Proceedings under Section 74 require evidence of fraud, wilful misstatement, or suppression of facts with intent to evade tax on the part of the recipient. Since the taxpayer had proved the genuineness of the transactions with proper documentary evidence, denial of ITC was held to be unsustainable. The Supreme Court dismissed the State’s SLP, thereby allowing the High Court’s judgment to stand.
