The Calcutta High Court in the case of Niranjan Paul Vs. Assistant Commissioner of State Tax, Siliguri Charge & Ors. vide Order No. WPA 707 of 2025 dated 08.04.2025, addressed the important observations regarding denial of Input Tax Credit on the basis of retrospective cancellation of supplier’s registration and alleged lack of physical movement of goods. The judgment reinforces the importance of fair adjudication in ITC related matters and the principle that bona fide purchasers should not suffer for faults of suppliers, unless collusion or fraud is established. Also, emphasis retrospective cancellation of registration must not be mechanically used to deny ITC without a proper factual circumstances. The Court herein remanded the matter back to the adjudicating authority to consider all documents produced by the petitioner including invoices, e-waybills, payment proofs, and supplier’s return filings and verify the authenticity of these documents. 

Facts of the Case: In this case, the petitioner availed ITC on supplies from Global Bitumen during March, 2019. The supplier’s registration was later cancelled with retrospective effect, and it was alleged the supplier was non-existent and non-operational at the declared address. The adjudicating authority denied ITC citing absence of physical movement and passed an order under Section 73(9) with interest and penalty. Subsequently, the appellate authority affirmed the order.

The Petitioner submitted that the said supplier was registered and in existence at the time of supply. Thus, retrospective cancellation of supplier’s GSTIN is under challenge in a pending writ. The Petitioner also produced documentary evidence like invoices, e-waybills, RTGS payments, ledger accounts, GSTR-2A match, supplier’s GSTR-1 and 3B filings, and delivery terms in its support. However, the Authorities failed to consider these documents or verify tax payment by the supplier.

The Department stated that due to lack of freight documents, toll receipts, and proof of delivery, actual physical movement of goods is unsubstantiated, rendering the ITC claim invalid.

Held that: The Court noted that both the adjudicating authority and the appellate authority failed to consider relevant documents already submitted by the petitioner. Also, failed to examine whether the supplier had paid tax and complied with statutory return filing. Therefore, no proper finding was returned on the authenticity and sufficiency of documents submitted by the petitioner to support the physical movement of goods and valid availing of ITC.

The Court held that both adjudication and appellate orders set aside and quashed. Further, matter remitted to the adjudicating authority with directions to consider all documents submitted by petitioner, verify compliance by supplier regarding tax payment and return filing, pass a reasoned order after affording an opportunity of hearing. 

To read the judgment 2025 Taxo.online 902