ITC Claim Cannot be Denied Despite Supplier’s Retrospective GST Registration Cancellation: Madras High Court

ITC Claims Should not be Dismissed merely due to Administrative Actions such as the Retrospective Cancellation of Supplier’s GST Registration

In a recent ruling on Writ Petition No.3505 of 2024 and W.M.P.Nos.3758 & 3759 of 2024, the Madras High Court has clarified that Input Tax Credit (ITC) claims cannot be rejected solely based on the retrospective cancellation of a supplier’s GST registration.

Case Background

The case of M/s. Engineering Tools Corporation vs. the Assistant Commissioner (ST) involved the petitioner’s assertion of having purchased goods in the fiscal year 2017-18. The purchases were supported by a range of documents including tax invoices, e-way bills, transport documents, and proof of payment through regular banking channels. Despite the submission of these documents, the ITC claim was reversed solely due to the retrospective cancellation of the supplier’s GST registration.

Court’s Observations

The Madras High Court noted that the petitioner made purchases during the mentioned fiscal year, and at most, could be required to provide evidence of the supplier’s existence during that time. Additionally, the petitioner might need to establish the genuineness of the transaction by presenting relevant documents such as tax invoices, e-way bills, lorry receipts, delivery challans, and proof of payment.

In this particular case, it was observed that the petitioner had indeed submitted such documents, which were unfortunately disregarded by the assessing officer.

Court’s Directive

The Court directed the assessing officer to thoroughly review whether the transaction was genuine by examining all relevant documents provided by the petitioner. Importantly, the Court emphasized that the ITC claim should not be outrightly rejected solely based on the retrospective cancellation of the supplier’s GST registration.

Court’s Order

Consequently, the High Court quashed the impugned assessment order and remanded the matter for reconsideration by the assessing officer.

This ruling by the Madras High Court provides clarity and protection for taxpayers, ensuring that legitimate ITC claims are not dismissed merely due to administrative actions such as the retrospective cancellation of a supplier’s GST registration.

To Access the CBIC Notification 6/2024-Central Tax Dated 22 february 2024 CLICK HERE

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