Case Details: Singhal Iron Traders vs. Additional Commissioner (2025) 36 Centax 36 (All.)
Judiciary and Counsel Details
- Piyush Agrawal, J.
- Shri Suyash Agarwal, Sr. Adv., for the Petitioner.
Facts of the Case
The assessee, a registered dealer engaged in trading iron scrap, effected purchases from a registered supplier whose GST registration was valid at the time of transactions. Subsequently, proceedings were initiated under section 74 of the CGST Act and the Uttar Pradesh GST Act, alleging wrongful availment of ITC and proposing penalty on the ground that the supplier’s registration had been cancelled and no business activity was undertaken. A show cause notice was issued, to which the assessee furnished a detailed reply, contending that the supplier was duly registered at the time of transaction, had filed GSTR-1 and GSTR-3B returns, and discharged applicable tax liability. Despite these submissions, an order in Form DRC-07 was passed confirming reversal of ITC and imposition of penalty, which was upheld in appeal. The matter was accordingly placed before the High Court.
High Court Held
The High Court held that it was undisputed that the supplier had filed returns in Form GSTR-1 and GSTR-3B, and the latter could not have been generated without payment of due tax. It observed that the authorities failed to verify whether the supplier existed and was active at the time of the transactions, and had instead proceeded solely on the basis of post-cancellation information. Once the supplier’s tax had been paid and reported in GSTR-1, no adverse inference could be drawn against the assessee merely because of subsequent cancellation of the supplier’s registration. The Court held that such post-facto cancellation could not justify denial of ITC or levy of penalty, and accordingly quashed the impugned orders.
