The Allahabad High Court ruled in favor of M/s Singhal Iron Traders in a case concerning the denial of Input Tax Credit (ITC) under the Goods and Services Tax (GST) framework. The petitioner, a trader in iron scrap, had purchased goods worth ₹44.26 lakh from M/s Shiv Iron Trading Co. during February and March 2019. These transactions were supported by tax invoices, e-way bills, and bank transfers, and the supplier had filed the necessary GST returns and paid the taxes. However, the supplier's registration was later canceled, and the supplier was deemed "non-existing," prompting the tax department to initiate proceedings under Section 74 of the GST Act. This led to the reversal of ITC worth ₹6.75 lakh and the imposition of an equivalent penalty on M/s Singhal Iron Traders.
The central issue was whether the ITC claimed by the purchaser could be denied because the supplier's registration was canceled after the transaction or the supplier was later found to be non-existent.
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The court held that since the tax was paid and returns were filed, the purchaser should not be penalized for the subsequent cancellation of the supplier's registration. The authorities had not verified the supplier's status at the time of the transaction, and the proceedings were based on inadequate information. There were no allegations of fake invoices or unregistered vehicles, and payments were made through proper banking channels. Consequently, the court quashed the assessment and appeal orders, allowing the writ petition in favor of M/s Singhal Iron Traders.
Order date: 26 Sept 2025
Parties: M/s Singhal Iron Traders v. Additional Commissioner & Anr.
Facts -
- The Petitioner, engaged in trading iron scrap, purchased goods worth ₹44.26 lakh from M/s Shiv Iron Trading Co. in Feb–Mar 2019.
- Purchases supported by tax invoices, e-way bills, and bank transfers; supplier filed GSTR-1 and GSTR-3B after paying tax.
- Later, suppliers registration was cancelled (30.04.2019) and found “non-existing.” Department initiated proceedings under Section 74, reversed ITC of ₹6.75 lakh, and imposed equal penalty. Appeal dismissed without considering documents produced by petitioner.
Issue -
- Whether ITC validly claimed by a purchaser can be denied solely on the ground that the suppliers registration was later cancelled or the supplier was found non-existing after the transaction?
Order -
- The single bench of the Hon’ble high court held that once tax was paid through GSTR-3B and returns were filed, no adverse inference can be drawn against the purchaser for later cancellation of suppliers registration.
- Authorities failed to verify whether supplier was valid at the time of transaction; proceedings based on borrowed information were unjustified.
- No allegation of fake invoices or unregistered vehicle; payments were made through banking channels. Therefore, the Impugned orders of assessment and appeal were quashed. Writ petition allowed in favour of petitioner.
