In a recent judgment, the Allahabad High Court addressed a case involving M/s Singhal Iron Traders, a company dealing in iron scrap, which faced issues regarding Input Tax Credit (ITC) after purchasing goods from M/s Arvind Metal Suppliers. The purchase took place in August 2018, and the transaction was documented with valid tax invoices and e-way bills, with payments made through banking channels. At the time, the seller had filed the necessary GSTR-1 and GSTR-3B returns, indicating tax payment to the government. However, the seller's registration was later cancelled in January 2019, leading authorities to initiate proceedings under Section 74 against M/s Singhal Iron Traders, alleging wrongful ITC claims due to the seller being a "non-existing" dealer.
Read More: GST – Allahabad High Court: Neither the adjudicating nor appellate authority recorded any finding that the petitioner acted with fraudulent intent or suppression of facts; Proceedings under Section 74 held invalid [Order attached]
The petitioner provided comprehensive records of the transactions, but the authorities dismissed these and imposed a tax and penalty equivalent to the ITC amount. The primary issue was whether ITC could be denied to a bona fide purchaser when the seller's registration was valid at the transaction time but later cancelled. The court ruled in favor of the petitioner, emphasizing that the seller was registered and compliant at the time of the transaction. It was noted that GSTR-3B cannot be filed without tax payment, and the authorities' reliance on "borrowed information" without verifying the supplier's existence at the transaction time was impermissible. The court found no evidence of fraud or misrepresentation, rendering the denial of ITC unjustified. Consequently, the orders against the petitioner were quashed, and the writ petition was allowed.
Order date: 04 Nov 2025
Parties: M/s Singhal Iron Traders v. Additional Commissioner (Appeal)-I, State Tax, Agra & Anr.
Facts –
- The petitioner, engaged in trading of iron scrap, purchased goods in August 2018 from a registered dealer, M/s Arvind Metal Suppliers, Agra, through valid tax invoices and e-way bills, paying ₹10,83,600 (including CGST & SGST of ₹1,95,048) via banking channels.
- The seller had duly filed GSTR-1 and GSTR-3B for the relevant period, meaning tax was paid to the government.
- Subsequently, the seller’s registration was cancelled on 31.01.2019, following which the authorities initiated Section 74 proceedings against the petitioner, alleging ITC was wrongly availed on purchases from a “non-existing” dealer.
- The petitioner furnished all purchase records and payment proofs but the authorities rejected them, imposed tax and penalty equal to ITC (₹1,95,048 each), and dismissed the appeal.
Issue –
- Whether ITC can be denied to a bona fide purchasing dealer when the selling dealer’s registration is cancelled subsequent to the transaction and the seller has duly filed GSTR-1 and GSTR-3B returns?
Order –
- The Court held that it was undisputed the seller was registered and had filed returns at the time of supply, and GSTR-3B cannot be filed without payment of tax.
- Once the selling dealer’s registration was valid at the transaction time and the purchaser paid tax through banking channels, no adverse inference could be drawn against the purchasing dealer merely because the seller’s registration was later cancelled.
- The authorities failed to verify the factual existence of the supplier at the transaction time and instead relied on “borrowed information”, which is impermissible.
- Since there was no fraud, collusion, or misrepresentation, denial of ITC was unjustified.
- The impugned orders dated 30.09.2021 and 23.06.2022 were quashed, and the writ petition allowed.
