The Calcutta High Court ruled that Input Tax Credit (ITC) cannot be automatically denied to a bona fide purchaser if the supplier defaults or invoices are absent in GSTR-2A. The case involved M/s. Cart Infralog Ltd. challenging a show cause notice (SCN) issued under Section 74 of the CGST Act for various financial years, accusing them of availing ineligible ITC and resulting in a demand of approximately ₹6.3 crore. The petitioners argued that they had provided all necessary documentation and that the invocation of Section 74 was merely to bypass the limitation period under Section 73.
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The Court observed that the SCN did not claim the petitioners lacked valid tax invoices or had not received goods/services, thus satisfying the requirements under Section 16(2)(a) and 16(2)(b). The issue pertained to Section 16(2)(c). Since proceedings against the defaulting supplier were already initiated, the Court held that recovery could not be sought from both the supplier and the bona fide recipient. Non-reflection of invoices in GSTR-2A alone could not justify ITC denial without alleging collusion.
Regarding FY 2018-19, the SCN was deemed time-barred under Section 73(10), and Section 74 was mechanically invoked without a material basis. The Court allowed the writ petition despite an alternative appellate remedy, citing non-application of mind and natural justice violations in the Order-in-Original, which was quashed with instructions for fresh adjudication.
Order Date - 27 August 2026
Parties: M/s. Cart Infralog Ltd. & Anr Vs The Additional Commissioner, HQ Anti-Evasion Unit, CGST & CX, Kolkata South Commissionerate & Ors.
Facts -
- M/s. Cart Infralog Ltd. & Anr. challenged the SCN dated 11.06.2025 issued under Section 74 of the CGST Act for FY 2018-19, 2019-20 and 2023-24, along with the subsequent Order-in-Original dated 09.12.2025.
- The Petitioners faced allegations of availing/utilising ineligible ITC of ₹88.57 lakh and excess ITC of ₹1.49 crore compared with GSTR-2A, resulting in principal demand of ₹2.37 crore and total demand of about ₹6.3 crore including interest and penalty.
- The Petitioners contended that the supplier, including M/s. Aster Trading Company, had defaulted in filing GSTR-3B and that they had furnished invoices, e-way bills, payment records and other supporting documents to the Department.
- The Petitioners argued that the adjudicating authority failed to properly consider their reply and documents. They also contended that Section 74 was invoked merely to overcome the limitation applicable under Section 73.
Issue -
- Whether ITC can be denied to a bona fide purchaser merely due to the supplier's failure to deposit tax/non-filing of GSTR-3B/non-reflection of invoices in GSTR-2A?
Order -
- The Court noted that the SCN did not allege that the Petitioners lacked valid tax invoices or had not received the goods/services. Therefore, the requirements under Section 16(2)(a) and 16(2)(b) were satisfied, with the dispute essentially relating to Section 16(2)(c).
- Since the Department had already initiated proceedings against the defaulting supplier, the Court observed that it could not seek recovery both from the supplier and the bona fide recipient. Mere non-reflection of invoices in GSTR-2A could not automatically result in denial of ITC, particularly when no collusion was alleged.
- For FY 2018-19, the Court found the SCN prima facie time-barred under Section 73(10). It held that the Department had mechanically invoked Section 74 by using expressions such as fraud, wilful misstatement and suppression without explaining the material basis for such allegations.
- The Court further held that the writ petition was maintainable despite the alternative appellate remedy because the Order-in-Original suffered from non-application of mind and violation of natural justice. The order was therefore quashed, with directions for fresh adjudication after considering the Petitioners' documents and granting a personal hearing.
