The Himachal Pradesh High Court in the case of M/s. Himalaya Communication Pvt. Ltd. Vs. Union of India and Others vide Case No. CWP No. 8809 of 2025 dated 06.06.2025, reinforced that ITC cannot be denied mechanically just because the supplier’s registration was cancelled retrospectively. All conditions under Section 16(2)—including actual receipt of goods/services, payment of tax, and possession of valid invoice—must be factually verified.
Facts of the Case: In this case, the petitioner is an registered taxpayer, claimed Input Tax Credit (ITC) under the CGST Act. The Petitioner had paid GST to the supplier, Possessed valid tax invoices, and verified that the supplier had discharged tax liability, as evidenced in GSTR-3B. However, the Assessing Officer and Appellate Authority denied ITC. The only ground cited for denial was that the supplier’s GST registration was cancelled retrospectively. The authorities did not verify whether the transaction was genuine or if tax had been collected and paid.
The Petitioner argued that the transaction was genuine, there was no fault on part of the recipient and the authorities did not examine relevant documents before denying ITC.
Issue: Whether ITC can be denied merely on the ground of retrospective cancellation of the supplier’s GST registration without examining the genuineness of the underlying transaction.
Held that: The Court in this case emphasized on the Genuineness of the transaction must be examined before denying ITC. The absence of inquiry into the authenticity of the documents or the nature of the transaction vitiated the decision-making process. Mere retrospective cancellation does not automatically vitiate past ITC claims unless it can be shown that the transaction itself was fictitious or that the buyer was complicit.
The Authorities did not assess the relevant documents such as tax invoices, GSTR filings, Proof of payment, movement of goods.
Further, held that any decision with financial consequences must be preceded by a fair hearing and evaluation of all relevant evidence. Summary adjudication without inquiry is liable to be set aside. The petitioner was denied a fair opportunity because adjudicating authorities did not investigate the transaction’s bona fides. Mechanical application of Section 16(2) without factual foundation is legally unsustainable.
The Court held that impugned order to be set aside, the matter to be remanded back to the Adjudicating Authority to be decided afresh after examining all relevant documents.
To read the complete judgment 2025 Taxo.online 1074
