Supreme Court to Decide Denial of ITC Due to Seller’s Registration Cancelled Retrospectively (Roshan Sharma v. Deputy Commissioner of Revenue, State Tax & Anr.)
Issue: Whether Input Tax Credit (ITC) can be legitimately denied to a purchaser (recipient) solely on the ground that the seller’s GST registration was subsequently cancelled with retrospective effect, even though the seller’s registration was valid on the date of the actual supply transaction.
Facts:
The petitioner, Roshan Sharma (a registered dealer), purchased goods from a supplier whose GST registration was later cancelled with retrospective effect.
The Revenue Department (Respondent) denied the ITC claimed by the Petitioner and raised a demand for tax, interest, and penalty.
The Petitioner contended that the denial of ITC is unsustainable because the registration was legally in force on the date of supply.
The High Court had declined to grant relief, emphasizing the availability of the statutory appeal remedy. The Petitioner also alleged denial of natural justice, such as the right to cross-examine the supplier/transporter and access crucial evidence like Fastag data.
Decision:
The Supreme Court of India issued notice and stayed the operation of the impugned High Court order that had denied relief to the petitioner.
Key TakeDowns:
Substantive Question of Law: The Supreme Court recognized the necessity to consider the fundamental question of whether ITC denial is justified when the supplier’s registration is retrospectively cancelled.
Genuineness of Transaction: The case raises the key question of whether the recipient (buyer) must be penalized for the post-facto conduct of the supplier, or if the denial must hinge on the genuineness of the transaction and the actual movement of goods .
Protection of Bona Fide Recipient: The final ruling will be crucial for protecting bona fide purchasing dealers against the administrative action of retrospective registration cancellation, which often causes financial hardship.
Procedural Fairness: The petitioner’s arguments regarding the denial of cross-examination and access to evidence like Fastag data also reinforce the need for procedural fairness in the adjudication process.
Source :- SC-HC-Roshan-Sharma