Denial of ITC set aside as retrospective cancellation of supplier’s GST registration was held insufficient without examining genuineness of transactions

Case Summary

Case Title: M/s Himalaya Communication Pvt. Ltd. v. Union of India & Ors.
Court: High Court of Himachal Pradesh, Shimla
Petition No.: CWP No. 8809 of 2025
Date of Judgment: 6th June, 2025
Category: Input Tax Credit
Relevant Sections: Section 16(2) of the CGST Act, 2017

Facts (Paras 1–2)

The petitioner, M/s Himalaya Communication Pvt. Ltd., challenged the denial of Input Tax Credit (ITC) by Respondents No. 3 and 4 through orders dated 31.03.2024 and 10.01.2025. The denial was solely based on the ground that the supplier’s GST registration had been cancelled retrospectively. The petitioner argued that it had already paid the tax to the supplier, possessed valid invoices, and the supplier had discharged its liability through GSTR-3B.

Questions (Paras 2–3)

The central issue was whether ITC can be denied merely because the supplier’s GST registration was retrospectively cancelled, without examining the genuineness of the underlying transactions and supporting documents.

Observations (Paras 2–3)

The Court observed that both the Assessing Officer and the Appellate Authority had failed to examine whether the transactions were genuine. Instead, they had mechanically denied ITC invoking Section 16(2) of the CGST Act. The Court emphasized that genuineness could only be determined after verifying invoices, payment proofs, and tax compliance by the supplier, which had not been done.

Judgment (Paras 4–5)

The Court allowed the writ petition and quashed the impugned orders dated 10.01.2025 and 31.03.2024. The matter was remanded back to the Adjudicating Authority to re-decide the issue after examining all relevant documents. The parties were directed to appear before the authority on 20.06.2025.

Table of Cases Referred

(In this judgment, no other precedents were referred or relied upon by the Court.)

Between Fine Lines

For businesses, this ruling clarifies that ITC cannot be denied simply because of retrospective cancellation of a supplier’s GST registration. Tax officers must first verify whether the underlying transaction was genuine and whether tax was duly paid before proceeding with disallowance. This strengthens protection for bona fide buyers who have complied with statutory conditions.

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