Khurja Scrap Trading Company Vs Additional Commissioner Grade-2 (Appeal) & Another (Allahabad High Court)
The Allahabad High Court has ruled that a buyer cannot be denied input tax credit (ITC) simply because the seller’s Goods and Services Tax (GST) registration was subsequently cancelled or because the seller was not found at their place of business during an inspection. In the case of Khurja Scrap Trading Company vs. Additional Commissioner, the court quashed the orders of the tax authorities and remanded the matter for a fresh decision, emphasizing that a bona fide transaction cannot be presumed to be fraudulent without concrete evidence of fraud, wilful misstatement, or suppression of facts on the part of the buyer.
The case originated from two transactions conducted by Khurja Scrap Trading Company in November 2021, in which it purchased roofing sheets from a supplier, M/s Unique Trading Company. The petitioner claimed ITC on these purchases based on valid tax invoices. However, on July 20, 2022, the tax authorities initiated proceedings against the petitioner under Section 74 of the GST Act, after a physical inspection of the supplier’s business location found it to be non-existent. Furthermore, the supplier’s GST registration was cancelled on April 8, 2022—after the petitioner’s transactions. The Commercial Tax Officer subsequently imposed a penalty and interest, which was upheld by the Additional Commissioner (Appeals). Khurja Scrap Trading Company then filed a writ petition with the Allahabad High Court, arguing that the denial of ITC was illegal.
