Retrospective cancellation alone not sufficient for ITC denial- says Calcutta High Court
Date and Year of Judgment
04 November 2025
The Calcutta High Court held that retrospective cancellation of supplier registration cannot be the sole ground for ITC denial, especially when the assessee has produced supporting documents proving genuineness of transactions.
Full Case Citation
Shyamalmay Paul v. Assistant Commissioner, SGST, Siliguri Charge & Ors.
WPA 2192 of 2025Judgment dated: 04.11.2025
High Court at Calcutta (Circuit Bench at Jalpaiguri)
Bench:Justice Hiranmay Bhattacharyya
The Court emphasized that quasi-judicial authorities must pass reasoned orders after examining evidences placed on record.
1. Main Issue Involved
Whether Input Tax Credit can be denied solely on the ground that the supplier’s registration was cancelled retrospectively, without examining the genuineness of transactions and evidences submitted by the assessee.
The key issue is whether retrospective cancellation + absence of inquiry = valid ITC denial.
The case highlights that Section 16 conditions must be tested based on evidence, not merely supplier status.
3. Facts of the Case
A show cause notice under Section 73(1) was issued alleging discrepancies in ITC for FY 2019–20.
Out of multiple discrepancies, only one issue remained — ITC availed on purchases from suppliers whose registration was cancelled retrospectively.
The petitioner had submitted detailed documentary evidence including:
Tax invoices
E-way bills
Transport documents
Bank statements
Ledger accounts
to prove that:
Transactions were genuine
Goods were physically received
Payment was made through banking channels
Supplier was registered at the time of transaction
However, the adjudicating authority and appellate authority denied ITC primarily on the ground of retrospective cancellation of supplier registration.
The authorities ignored substantive evidences and relied solely on technical ground of retrospective cancellation.
4. Petitioner’s Submissions
The petitioner submitted that:
Transactions were bona fide and supported by documentary evidence.
There was actual movement of goods.
Payment was made through banking channels.
Supplier was registered at the time of supply.
Retrospective cancellation cannot be a ground to deny ITC.
The petitioner established all factual conditions required under Section 16.
5. Department’s Submissions
The department contended that:
Burden lies on the assessee to prove genuineness of ITC claim.
The appellate authority had passed a detailed order.
The petitioner failed to attend personal hearing.
The department relied on burden of proof and procedural lapse (non-attendance).
6. Analysis and Findings of the Court
The Court observed that:
The petitioner had submitted all relevant documents to establish genuineness of transactions.
The appellate authority acknowledged existence of such documents.
However, the authority failed to analyse or record findings on these documents.
The Court held that:
ITC was denied only on the ground that invoices were issued after retrospective cancellation date.
No independent finding was given on genuineness of transactions or movement of goods.
The Court further observed that:
Retrospective cancellation alone cannot be a valid ground for ITC denial.
Authorities must examine whether statutory conditions under Section 16 are satisfied.
Additionally, the Court held that:
The appellate order was a non-speaking order.
Failure to consider evidence amounts to failure of statutory duty.
The Court clearly distinguished between:
Legal ground (retrospective cancellation) and
Factual verification (genuineness of transaction)
and held that both must be independently examined.
Important Observations of the Court
Retrospective Cancellation Not Sole Ground
“It is now well-settled that retrospective cancellation of registration of the supplier, cannot be the sole ground for denying the Input Tax Credit to the purchaser.” (Para 18)
Failure to Examine Evidence by Appellate Authority
“Without assigning any reason as to why the documents produced by the petitioner cannot be accepted… affirmed the order… only on the ground that the invoices were issued after the date of cancellation…” (Para 15)
Non-Speaking Order is Unsustainable
“This court holds that the order passed by the appellate authority is a non-speaking order and only for such reason the same is liable to be set aside.” (Para 21)
Duty to Examine Documents
“It was incumbent upon the appellate authority to consider such documents… and return a finding… as to why same is not acceptable.” (Para 19)
The judgment mandates that ITC denial requires reasoned findings on evidence, not mechanical conclusions.
7. Judgment of the Court
The High Court held that:
The appellate order is unsustainable and non-speaking.
The order was set aside.
Matter remanded back for fresh adjudication.
Authority directed to pass a reasoned order after granting opportunity of hearing.
Relief was granted not only on legal ground but also on procedural infirmity (absence of reasoning).
8. Similar / Related Judgments
Tvl. Adha Impex v. CTO – Madras HC (VAT)
Shyamalmay Paul (earlier case WPA 708 of 2025)
These cases establish that buyer cannot be penalized without examining transaction genuineness.
9. CA BTA Insights
This judgment is extremely significant for GST ITC litigation involving supplier default cases.
Key Legal Principles
Retrospective cancellation ≠ automatic ITC denial
Authorities must examine:
Movement of goods
Payment trail
Documentary evidence
Orders must be reasoned and speaking
Burden of proof cannot be discharged by mere reference to cancellation
Practical Litigation Strategy
This judgment can be used effectively where:
ITC denied due to supplier cancellation
Authorities rely only on portal data / backend cancellation
Orders are non-speaking or mechanical
Important Position under GST
Even if supplier is cancelled retrospectively, ITC must be allowed if buyer proves:
Purchase is genuine
Goods are received
Payment is made
Supplier was active at the time of transaction
This judgment strengthens a powerful litigation argument: “ITC cannot be denied merely on supplier default — department must disprove the genuineness of the transaction.”