Applicability of ITC Reversal in case of Retrospective Cancellation of Registration of Suppliers, Goods and Services Tax - GST

[Pradeep Singhi]

As a registered taxpayer, we have duly availed the ITC (Input Tax Credit) from our various suppliers of goods complying with the provisions of Section 16(2) of CGST Act, 2017 i.e.

• We have received the invoices.
• We have received the goods along with the delivery challan, weight slips, e-way bills, and transporter details including the Vehicle Number and Driver Details.
• The Supplier has duly filed the GSTR-1 & GSTR-3B.
• The ITC is being duly reflected in our GSTR-2A/2B.
• We have duly paid the payment to the suppliers within 180 days.

Therefore, the ITC has been availed only after the compliance & verification of the above provisions and we have not availed any credits ineligible under Section 17(5) of the Act.

However, currently some of the supplier's registration number has been cancelled suo-moto retrospectively i.e. they have filed the returns let's say till Mar’23 however, the date of cancellation shown on the GST Portal is Dec’18.

Opinion Sought: - The Supplier's registration currently is being reflected as cancelled suo-moto on the GST Portal effective date of which is prior to the period of their filed returns. Therefore, we hereby seek an opinion as to whether we shall be legally subject to reversal of ITC for the period where the supplier have filed their GSTR-1 & GSTR-3B and such ITC is duly reflected in our GSTR-2A ?

Posts / Replies

[KASTURI SETHI]

Sh.Pradeep Singhi Ji,

ITC cannot be denied to you. When credit was taken all docs were valid and GST registration was valid. Pl. go through the following case law and also relied upon case laws mentioned therein.

2023 (6) TMI 533 - CALCUTTA HIGH COURT - M/S. GARGO TRADERS VERSUS THE JOINT COMMISSIONER, COMMERCIAL TAXES (STATE TAX) & ORS.

Denial of Input Tax Credit (ITC) - Cancellation of registration of supplier - rejection of claim of the petitioner without considering the documents relied by the petitioner - violation of principles of natural justice - Reliance of Judgement of HC in M/S LGW INDUSTRIES LIMITED [ 2021 (12) TMI 834 - CALCUTTA HIGH COURT] - HELD THAT:- The main contention of the petitioner that the transactions in question are genuine and valid and relying upon all the supporting relevant documents required under law, the petitioner with due diligence verified the genuineness and identity of the supplier and name of the supplier as registered taxable person was available at the Government Portal showing its registration as valid and existing at the time of transaction - Admittedly at the time of transaction, the name of the supplier as registered taxable person was already available with the Government record and the petitioner has paid the amount of purchased articles as well as tax on the same through bank and not in cash.

This Court finds that without proper verification, it cannot be said that there was any failure on the part of the petitioner in compliance of any obligation required under the statute before entering into the transactions in question - the respondent authorities only taking into consideration of the cancellation of registration of the supplier with retrospective effect have rejected the claim of the petitioner without considering the documents relied by the petitioner.

The impugned orders are set aside. The respondent no. 1 is directed to consider the grievance of the petitioner afresh by taking into consideration of the documents which the petitioner intends to rely in support of his claim - Petition disposed off.

[KASTURI SETHI]

2023 (4) TMI 1123 - GUJARAT HIGH COURT ALLYSSUM INFRA VERSUS UNION OF INDIA

Cancellation of registration of petitioner - cancellation on the ground that the petitioner did not file Goods and Service Tax returns - HELD THAT:- It is observed that when the competent authority considers the issue of revocation of cancellation of petitioners’ GST registration under the aforesaid notification, the petitioners shall be entitled to lodge its claim for availment of Input Tax Credit in respect of the period from the cancellation of the registration till the registration is restored.

Petition disposed off.

[KASTURI SETHI]

Registration should not be cancelled retrospectively.------------Delhi High Court in the case of Aditya Polymers Pvt. Ltd. - 2023 (4) TMI 156 - DELHI HIGH COURT

[Shilpi Jain]

Also the eligibility of ITC has to be seen at the time of receipt of the supply. At such time all the conditions were satisfied and duly credit was availed.

Subsequently some absurd act of the department of cancelling the registration retrospectively should not deny credit in your hands.

There needs to be some good sense prevailing at the department's end. It has been noted from various HC decisions that they are cancelling registration for reasons not allowed in the law also, like not replying to SCN, etc. It is time that the department acts responsibly and does not use its powers to harass the taxpayers.

[Padmanathan Kollengode]

Agreed with Shilpi Ma'am. If the supplier has remitted the tax to the Government before his registration was cancelled, then ITC cannot be denied to you.

[Ganeshan Kalyani]

How can a cancellation of GSTIN be done retrospectively.

[Pradeep Singhi]

Thank You, for your valuable insights and for taking out your precious time to provide your expert views on our query. I'm highly obliged and appreciate your prompt responses.

In terms of Section 29(2) of the CGST Act, the proper officer is empowered to cancel the registration from any such date as he may deem fit including from any retrospective date. However, selecting a date from which to cancel the registration cannot be arbitrary. It is essential that the exercise of powers to cancel the registration ab initio, must be based on material on record and some rationale.

In our instant case, no material evidence has been brought on records to provide us as to why such registrations of the suppliers were / are cancelled. Search proceedings has been carried out and continued for now more than 15 days however, till date no such Supplier's orders, SCNs nor any Circulars, Sections or any Rules has been provided to reverse the ITC w.r.t. these suppliers.

Under the Search 67(4), only verbal statements are made so as to reverse the ITC of suppliers whose registration has been cancelled retrospectively. Please advise.