Lalwani Ferro Alloys ltd. Vs Assistant Commissioner CGST & high CX (Calcutta High Court)
Calcutta High Court’s Landmark Interim Order: Navigating ITC Denials Amidst Supplier Insolvency – A Detailed Analysis of Lalwani Ferro Alloys Ltd.
Introduction:
The intricate interplay between the Goods and Services Tax (GST) regime and the Insolvency and Bankruptcy Code (IBC) continues to be a fertile ground for legal disputes. In a significant interim order, the Calcutta High Court, in the case of M/s Lalwani Ferro Alloys Ltd. v. Assistant Commissioner, CGST & CX, Park Street Division Kolkata South Commissionerate, GST Bhawan & Ors. (WPA 13913 of 2025), dated July 16, 2025, has provided crucial insights into the complexities surrounding Input Tax Credit (ITC) denials when a supplier undergoes insolvency. This ruling, delivered by Justice Raja Basu Chowdhury, delves into the nuances of Section 16(2)(c) of theCentral Goods & Services Tax Act, 2017 (CGST Act, 2017) and offers vital takeaways for businesses grappling with similar challenges.
Background of the Dispute:
The genesis of the dispute lies in M/s Lalwani Ferro Alloys Ltd. (the petitioner) availing ITC based on GSTR-1 filings made by their supplier, M/s Cosmic Ferro Alloys Limited. The crux of the problem arose when the supplier failed to discharge their GST liability by not filing GSTR-3B returns. This non-compliance was reportedly a consequence of the supplier entering into insolvency proceedings. Consequently, the ITC availed by the petitioner was reversed by the tax authorities, citing the provisions of Section 16(2)(c) of the CGST Act, which mandates that the tax charged on the supply must have been actually paid to the government.
