Trivesh Enterprises LLP Vs Vijay Eknath Kumbhar (GSTAT Thane)
Summary: The GST Appellate Tribunal, Thane Bench, allowed two connected appeals by Trivesh Enterprises LLP by remanding the disputes concerning input tax credit for FY 2020-21 and FY 2021-22 to the Adjudicating Authority. The appellant, engaged primarily in works contract and construction services, had claimed ITC of Rs. 4,89,456 for FY 2020-21 on supplies from M/s Eagle Enterprises, M/s Prati Enterprises and M/s Bhagaban Barik / M/s Maruti Enterprises, and Rs. 6,80,142 for FY 2021-22 on supplies from M/s Singh Lakshay Traders. The Department subsequently categorised these suppliers as non-genuine taxpayers and cancelled their registrations retrospectively, alleging fraudulent registration and passing of credit without underlying supplies. Notices dated 25.03.2023 were issued under Section 73. As no replies were filed at adjudication, ex parte orders dated 12.10.2023 confirmed total demands of Rs. 8,39,640 and Rs. 10,44,328, respectively, including tax, interest and penalty.
The appellant pursued statutory appeals after making the mandatory pre-deposits and furnished invoices, bank statements and e-way bills. The First Appellate Authority rejected the appeals both on merits, citing insufficient collateral evidence of actual receipt and transportation of goods, and for non-prosecution owing to non-attendance at hearings. Before the Tribunal, the appellant contended that the notices and orders were mechanical and unreasoned, that the suppliers were registered and shown as active when the transactions occurred, and that goods and services had actually been received and paid for through banking channels. It argued that a recipient could not audit a supplier’s accounts or ensure subsequent tax compliance, and relied on decisions concerning protection of bona fide purchasers. The Revenue maintained that invoices and banking payments alone did not establish actual supplies, emphasised the claimant’s burden under Section 155, and relied on Ecom Gill Coffee Trading to seek corroborative evidence of physical movement and receipt of goods.
The Tribunal confined its determination to procedural legality and natural justice, expressly leaving substantive ITC eligibility undecided. It recognised that Sections 16 and 155 of the CGST/MGST Act placed the burden of establishing eligibility on the claimant, but held that the authorities must provide a fair and reasonable opportunity to discharge that burden. The notices merely stated “AS PER ATTACHMENT” in their factual and grounds sections without elaborating the alleged contravention. The adjudication orders described the issue in a single line and confirmed substantial demands without independent analysis or factual findings. Relying on Kranti Associates, the Tribunal treated the absence of reasons as a fundamental defect. It further held that dismissal of statutory appeals for non-prosecution was legally unsustainable: Section 107 required a written decision stating the points for determination, the decision and reasons, even where the appellant did not appear. Purushottam Stores, Nav Nirman Construction and Premkumar Arjundas Luthra were cited in support.
Accordingly, the Tribunal set aside the Orders-in-Appeal dated 27.11.2025 and 28.11.2025 and both Orders-in-Original dated 12.10.2023. It held that retrospective cancellation of suppliers’ registrations could not, by itself, sustain demands without independent factual verification and a fair opportunity of hearing. The Adjudicating Authority was directed to communicate specific grounds for proposed ITC disallowance, grant a reasonable personal hearing, independently examine corroborative evidence under Sections 16(2) and 155, and pass a detailed speaking order addressing the submissions and evidence. The appellant was directed to cooperate and furnish invoices, payment records and evidence of physical movement of goods within the prescribed timelines. This was an open remand with every issue of fact and law left open; the Tribunal neither finally allowed the ITC claims nor conclusively determined the associated tax, interest or penalty liability.
Cases Discussed
- Commissioner of Trade & Tax, Delhi v. M/s Shanti Kiran India (P) Ltd., 2025-TIOL-77-SC-VAT (Supreme Court). Cited by the appellant in support of its submission that a bona fide recipient should not suffer for a supplier’s default absent collusion or fraud.
- Nav Nirman Construction v. Union of India, [2023] 157 taxmann.com 343 (Patna High Court); CWJC No. 16940 of 2023; 06.12.2023. Relied upon for the appellate authority’s obligation to decide the appeal on merits despite the appellant’s absence.
- Suncraft Energy Private Limited and Another v. Assistant Commissioner, State Tax, MAT No. 1218 of 2023; 02.08.2023 (Calcutta High Court). Cited by the appellant in support of its challenge to ITC denial arising from supplier default.
- Purushottam Stores v. State of Bihar, [2023] 150 taxmann.com 480 (Patna High Court). Relied upon for the statutory duty to examine the merits and appeal grounds even when the appellant does not appear.
- State of Karnataka v. M/s Ecom Gill Coffee Trading Private Limited, Civil Appeal No. 230 of 2023; 13.03.2023 (Supreme Court). Relied upon by the Revenue to contend that invoices and banking payments must be supported by cogent evidence establishing actual movement and receipt of goods.
- D.Y. Beathel Enterprises v. State Tax Officer (Data Cell), 85 GSTR 170 (Madras High Court); W.P. (MD) No. 2127 of 2021 and connected matters; 24.02.2021. Cited by the appellant in support of its submission concerning supplier default and protection of bona fide recipients.
- CIT (Central), Nagpur v. Premkumar Arjundas Luthra (HUF), [2017] 297 CTR 614 (Bombay High Court); Income Tax Appeal No. 2336 of 2013; 25.04.2016. Cited by the Tribunal for the obligation to dispose of an appeal on merits rather than dismiss it for non-prosecution.
- Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan, (2010) 9 SCC 496 (Supreme Court). Relied upon for the requirement that quasi-judicial authorities record reasons and pass speaking orders as an essential facet of natural justice.
- State of Maharashtra v. Suresh Trading Company, [1998] taxmann.com 1747 (Supreme Court). Cited by the appellant in support of its challenge to adverse consequences arising from retrospective cancellation of a supplier’s registration.
FULL TEXT OF THE ORIGINAL GSTAT JUDGMENT/ORDER
1. The present two appeals have been filed by the Appellant, M/s Trivesh Enterprises LLP, assailing two separate Orders-in-Appeal both dated 28.11.2025 (with one bearing communication date 27.11.2025 for FY 2021-22), passed by the Joint Commissioner of State Tax (Appeals), Kalyan. Since the underlying facts, the nature of the dispute, and the questions of law involved in both appeals are identical, they are taken up together for disposal by way of this common order.
2. Brief Facts of the Case
2.1 The Appellant is a registered Limited Liability Partnership under the CGST/MGST Act, 2017, primarily engaged in the business of providing works contract and construction services. The dispute pertains to the disallowance of Input Tax Credit (ITC) for two financial years:
- For Financial Year 2020-21: The Appellant availed ITC amounting to Rs. 4,89,456/- (CGST Rs. 2,44,728/- and SGST Rs. 2,44,728/-) on inward supplies procured from registered suppliers, namely M/s Eagle Enterprises, M/s Prati Enterprises, and M/s Bhagaban Barik / M/s Maruti Enterprises.
- For Financial Year 2021-22: The Appellant availed ITC amounting to Rs. 6,80,142/- (CGST Rs. 3,40,071/- and SGST Rs. 3,40,071/-) on inward supplies procured from a registered supplier, M/s Singh Lakshay Traders.
2.2 The genesis of the dispute lies in the subsequent categorisation of the aforementioned suppliers by the Department as “Non-Genuine Taxpayers” (NGTPs). The GST registrations of these suppliers were cancelled by the Department ab-initio (retrospectively) on the premise that their registrations were obtained by means of fraud, wilful misstatement, or suppression of facts, and that they had allegedly passed on ITC without any underlying supply of goods or services.
2.3 Based solely on these supplier-side cancellations, Show Cause Notices (SCNs) in Form GST DRC-01 dated 25.03.2023 were issued to the Appellant under Section 73 of the CGST/MGST Act, 2017 for both financial years, proposing to disallow the respective ITC amounts. It is a matter of record that the SCNs issued lacked substantive reasoning in the body of the notices, cryptically stating “AS PER ATTACHMENT” under the ‘Brief Fact of the Case’ and ‘Grounds’ sections.
2.4 The Appellant did not file a reply to the SCNs at the adjudication stage. Consequently, the Adjudicating Authority (Deputy Commissioner of State Tax, Bhiwandi-501) passed ex-parte Orders-in-Original in Form GST DRC-07 dated 12.10.2023 for both periods, mechanically confirming the tax demands. The total demand confirmed for FY 2020-21 was Rs. 8,39,640/- (Tax Rs. 4,89,456/-; Interest Rs. 3,01,238/-; Penalty Rs. 48,946/-). The total demand confirmed for FY 2021-22 was Rs. 10,44,328/- (Tax Rs. 6,80,142/-; Interest Rs. 2,96,170/-; Penalty Rs. 68,016/-).
2.5 Aggrieved by these adjudication orders, the Appellant preferred statutory appeals under Section 107 of the Act before the Joint Commissioner of State Tax (Appeals), Kalyan, after making the mandatory pre-deposits. The Appellant placed on record written submissions along with primary and contemporaneous documentary evidence, including tax invoices, bank statements, and E-way bills, to substantiate the genuineness of the transactions.
2.6 However, the First Appellate Authority, vide the impugned Orders-in-Appeal dated 27/28.11.2025, rejected the appeals. The rejection was based concurrently on two grounds: first, on merits, stating that the Appellant failed to discharge the burden of proof under Section 155 of the Act as they did not produce complete collateral transport documents (such as lorry receipts, proof of payment of transport charges, toll receipts, etc.); and second, on the ground of “non-prosecution”, citing the Appellant’s failure to attend multiple scheduled personal hearings. The present appeals have been preferred against these impugned Orders-in-Appeal.
3. Grounds of Appeal and Submissions by the Appellant
3.1 Ms. Dimple Amit Soni, learned Chartered Accountant appearing for the Appellant strongly challenged the impugned orders, submitting that the ex-parte Orders-in-Original and the Orders-in-Appeal are entirely arbitrary, non-speaking, mechanical, and have been passed in gross violation of the principles of natural justice. The Appellant contended that the Adjudicating Authority mechanically confirmed the demands without any independent verification, and the Appellate Authority unlawfully dismissed the statutory appeals citing “non-prosecution”, deliberately ignoring the settled legal position that a quasi-judicial appellate authority is mandated to decide the case on merits based on the documentary evidence available on record.
3.2 On the merits of the ITC claim, the Appellant submitted that they had strictly fulfilled all the statutory conditions prescribed under Section 16(2) of the CGST Act, 2017. They were in possession of valid tax invoices issued by suppliers who were registered and reflecting as “Active” on the GST Common Portal at the time of the transactions. Furthermore, the goods and services were actually received, utilized in outward taxable supplies, and the consideration, inclusive of GST, was paid through normal banking channels.
3.3 The Appellant invoked the legal maxim “Lex Non Cogit Ad Impossibilia”, arguing that the law does not compel a man to do what he cannot possibly perform. It was submitted that there is no statutory mechanism empowering a recipient to audit the supplier’s bank accounts or ensure their post-transaction tax compliance. The Appellant contended that retrospective cancellation of a supplier’s registration is an administrative action between the Department and the supplier, which cannot be used to retrospectively divest a bona fide purchaser of their vested right to ITC.
3.4 To demonstrate that the burden of proof under Section 155 of the Act stood fully discharged, the Appellant relied on voluminous documentary evidence submitted during the appellate proceedings, which included tax invoices, bank statements reflecting payments, and statutory E-way bills evidencing the physical movement of goods. The Appellant pointed out that the Department had accepted the outward tax liability discharged on the sale of goods/services, which implicitly establishes the existence and genuineness of the corresponding inward purchases, thereby barring the Revenue from adopting a contradictory stance.
3.5 The Appellant placed reliance on several binding judicial precedents, including the Hon’ble Supreme Court’s decisions in State of Maharashtra v. Suresh Trading Company [1998 taxmann.com 1747 (SC)] and Commissioner of Trade & Tax, Delhi v. M/s Shanti Kiran India (P) Ltd., [2025-TIOL-77-SC-VAT] as well as High Court judgments in Suncraft Energy Pvt. Ltd. (Calcutta HC-)-MAT 1218 0f 2023 and D.Y. Beathel Enterprises (Madras HC)-85 GSTR 170 (Mad). It was argued that these judgments consistently hold that a bona fide recipient cannot be penalized for the supplier’s default in the absence of collusion or fraud.
3.6 Finally, the Appellant submitted that since the principal demand of tax is unsustainable in law, the consequential levy of interest under Section 50(3) and penalty under Section 73(9) must automatically fail, as there is no contumacious conduct, suppression, or misstatement on the Appellant’s part.
4. Submissions by the Respondent (Revenue)
4.1 Per contra, Shri. Parikshit Sawant, Learned Deputy Commissioner, SGST, Authorized Representative for the Respondent reiterated the findings recorded in the impugned Orders-in-Appeal and vehemently justified the disallowance of the ITC. It was submitted that the suppliers in question were subjected to inquiry and were found to be “Non-Genuine Taxpayers” whose registrations were subsequently cancelled ab-initio for having obtained registration by means of fraud and for issuing fake invoices without any underlying supply of goods/services.
4.2 The Respondent argued that mere possession of a tax invoice and payment through banking channels do not inherently entitle a taxpayer to ITC. Under Section 16(2)(b) of the CGST Act, actual receipt of goods is a mandatory pre-condition. Relying on Section 155 of the Act, the Respondent emphasized that the burden of proving the eligibility for ITC, particularly the physical movement of goods/receipt of services, rests entirely on the claimant.
4.3 The Respondent pointed out that despite being granted multiple opportunities during the appellate proceedings, the Appellant failed to produce crucial collateral evidence necessary to substantiate the physical receipt of goods, such as lorry receipts, consignment notes, proof of payment of transport charges, road toll booth receipts, updated part-B of e-way bills, payments made to mathadi workers (loaders), or comprehensive stock registers.
4.4 The Respondent heavily relied upon the judgment of the Hon’ble Supreme Court in State of Karnataka v. Ecom Gill Coffee Trading Private Limited, asserting that in cases where the genuineness of the transaction is in doubt due to the supplier’s fraudulent profile, the purchasing dealer must prove the actual physical movement of the goods by producing cogent materials beyond just invoices and payment particulars.
4.5 Defending the dismissal of the appeals on the grounds of “non-prosecution,” the Respondent highlighted that the First Appellate Authority had issued numerous personal hearing notices and adjournment notices to the Appellant. The Appellant’s persistent failure to attend the hearings demonstrated a complete lack of interest in pursuing the appeals and explaining the submitted documents. Consequently, the Appellate Authority was entirely justified in deciding the matter based on the available records, which, in the Revenue’s view, failed to establish the Appellant’s claims.
5. Questions of Law Involved
5.1 In view of the facts of the case as discussed above, in our view these analogous appeals give rise to the following substantial questions of law for consideration by this Tribunal:
(a) Whether the denial of Input Tax Credit (ITC) under Section 16 of the CGST/MGST Act, 2017, through Show Cause Notices and Orders-in-Original that are cryptic, non-speaking, and completely devoid of independent reasoning, constitutes a gross violation of the principles of natural justice?
(b) Whether a First Appellate Authority, exercising statutory jurisdiction under Section 107 of the CGST/MGST Act, 2017, is legally empowered to dismiss a statutory appeal on the ground of “non-prosecution” or default in appearance, without independently adjudicating the substantive documentary evidence placed on record?
(c) Whether, in light of the procedural infirmities and the absence of reasoned factual findings at both the adjudication and appellate stages, the matters warrant a remand to the Adjudicating Authority for a fresh, de novo assessment?
6. Discussion and Findings
6.1 We have carefully considered the extensive submissions made by the Appellant and the learned Authorized Representative for the Respondent, and have meticulously perused the records of both the financial years (FY 2020-21 and FY 2021-22). The core issue before this Tribunal at this stage is not the final determination of the Appellant’s substantive eligibility for the Input Tax Credit (ITC), but rather the procedural propriety, legal validity, and adherence to the bedrock principles of natural justice by the lower authorities.
6.2 The entire dispute fundamentally revolves around the Appellant’s entitlement to claim ITC on inward supplies from vendors whose registrations were retrospectively cancelled. The substantive law governing this entitlement is enshrined in Section 16 of the CGST/MGST Act, 2017. The relevant extracts of Section 16 are reproduced below for ease of reference:
Section 16. Eligibility and conditions for taking input tax credit.
(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business…
(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,—
(a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;
(b) he has received the goods or services or both.
6.3 Furthermore, the burden to prove that these statutory conditions have been fulfilled rests squarely upon the taxpayer claiming the ITC, as explicitly mandated by Section 155 of the CGST/MGST Act, 2017:
Section 155. Burden of proof.
Where any person claims that he is eligible for input tax credit under this Act, the burden of proving such claim shall lie on such person.
6.4 While the statutory burden of proof lies on the Appellant under Section 155, the revenue authorities are equally bound by a procedural and constitutional mandate to afford the taxpayer a fair and reasonable opportunity to discharge this burden. This administrative obligation begins with the issuance of a legally valid, detailed, and speaking Show Cause Notice. Upon perusal of the Show Cause Notices issued in Form GST DRC-01 dated 25.03.2023 under Section 73 of the Act, we find a glaring lack of substantive reasoning. Under both the “Brief Fact of the Case” and “Grounds” sections, the notices cryptically state “AS PER ATTACHMENT”, without elaborating on any specific findings or detailing the exact nature of the Appellant’s alleged contravention.
6.5 This procedural infirmity was severely compounded by the Adjudicating Authority in the ex-parte Orders-in-Original in Form GST DRC-07 dated 12.10.2023. The orders describe the entire issue in a single line as “In-eligible ITC claimed from non-existant supplier” and mechanically proceed to confirm substantial demands without recording any independent analysis, detailing factual findings, or discussing the transactions in question. It is a settled position of administrative law, as enunciated by the Hon’ble Supreme Court in Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan [(2010) 9 SCC 496], that every quasi-judicial authority must pass a speaking order, and the recording of reasons is an essential facet of natural justice. The failure of the Adjudicating Authority to do so fundamentally vitiates the initial assessment proceedings.
6.6 When the matters were escalated, the Appellant submitted voluminous documentary evidence including invoices, bank transaction details, and GST filing statuses to discharge their burden under Section 155. However, the First Appellate Authority, vide the impugned Orders-in-Appeal dated 27/28.11.2025, rejected the appeals not only on merits but concurrently dismissed them on the ground of “non-prosecution” due to the Appellant’s non-attendance at scheduled hearings.
6.7 We find the dismissal of a statutory appeal for “non-prosecution” to be legally unsustainable. Section 107 of the CGST Act dictates the procedure for the Appellate Authority. Sub-sections (11) and (12) of Section 107 mandate the following:
(11) The Appellate Authority shall, after making such further inquiry as may be necessary, pass such order, as it thinks just and proper, confirming, modifying or annulling the decision or order appealed against…
(12) The order of the Appellate Authority disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for such decision.
6.8 Interpreting these exact provisions, the Hon’ble Patna High Court in the case of Purushottam Stores v. State of Bihar [2023] 150 taxmann.com 480 (Patna) categorically held that the Appellate Authority has a statutory duty to look into the merits of the matter and examine the grounds raised, even if there is no presence recorded of the appellant. Dismissing an appeal for non-prosecution amounts to an abdication of statutory powers. This position was reaffirmed in Nav Nirman Construction v. Union of India [2023] 157 taxmann.com 343 (Patna). Similarly, the Hon’ble Bombay High Court in CIT v. Premkumar Arjundas Luthra (HUF) has clarified that an appellate authority is obliged to dispose of the appeal on merits and does not have the power to dismiss an appeal for non-prosecution.
6.9 Since the foundational adjudication orders were devoid of any legal or factual reasoning, and the appellate orders failed to cure this defect by improperly dismissing the appeals on the procedural ground of non-prosecution, we are of the considered view that there has been a gross violation of the principles of natural justice. The Department cannot rely solely on the retrospective cancellation of the suppliers’ registrations to confirm a demand without independently verifying the facts and giving the Appellant a fair, transparent opportunity to be heard. Therefore, without expressing any opinion on the final merits regarding the admissibility of the ITC amounts, we deem it necessary and proper to remand both matters back to the Adjudicating Authority to ensure that justice is served.
7. ORDER
7.1 For the facts, reasons, and legal provisions discussed hereinabove, the impugned Orders-in-Appeal passed by the Joint Commissioner of State Tax (Appeals), Kalyan, dated 27.11.2025 and 28.11.2025, as well as the Orders-in-Original Reference Nos. ZD271023025255U and ZD271023025282X both dated 12.10.2023 passed by the Deputy Commissioner of State Tax, Bhiwandi-501, are hereby set aside.
7.2 Both matters are remanded to the Adjudicating Authority for a fresh, de novo adjudication in accordance of law keeping all the issues open. The Adjudicating Authority is directed to strictly adhere to the principles of natural justice. Specifically, the Authority shall:
(a) Communicate detailed, specific grounds for the proposed disallowance of ITC to the Appellant.
(b) Grant the Appellant a sufficient and reasonable opportunity of being heard in person.
(c) Allow the submission and independent examination of all corroborative documentary evidence in support of their claim under Section 16(2) and Section 155 of the CGST/MGST Act, 2017.
(d) Pass a detailed, speaking, and reasoned order in accordance with the law, addressing all submissions and evidence placed on record.
7.3 The Appellant is directed to cooperate fully with the remand proceedings and proactively adduce all requisite evidence including proof of payment, invoices, and physical movement of goods etc. before the Adjudicating Authority within the timelines prescribed during the fresh proceedings. Needless to say that this is an open remand and the adjudicating authority needs to consider all the issues on facts and law relevant to this case and shall not get influenced by any of the above observations of this bench.
7.4 The appeals are allowed by way of remand to the adjudicating authority.
(Pronounced in open court on 22.10.2026)
