Summary: The GST Appellate Tribunal, State Bench, Cuttack, in Priya Gupta v. Avay Vincent Minz & Others, Appeal No. APL/4/CTT/2026, decided on 28 October 2026, held that the retrospective cancellation of a supplier’s GST registration cannot, by itself, establish that the recipient did not receive goods or justify denial of input tax credit. The dispute concerned ITC of ₹8,95,252 on January 2018 purchases from M/s Annapurna Enterprises, along with interest of ₹9,15,364 and penalty of ₹8,95,252. The Department alleged that the supplier was non-existent and the transactions were fictitious, relying substantially on its subsequent registration cancellation. The recipient maintained that the purchases were genuine and supported by invoices, banking payments, transport particulars, stock records and return information. The Tribunal emphasised that eligibility must be determined by examining the actual transactions in accordance with Sections 16 and 155 of the CGST Act. It also found that the allegations did not establish the fraud-related ingredients necessary for invoking Section 74. The adjudication and first appellate orders were set aside, but ITC was not granted unconditionally. Applying Section 75(2), the Tribunal directed the proper officer to treat the notice as one under Section 73 and determine eligibility afresh after examining all available evidence, including additional documents, and granting an appropriate hearing.
- Introduction
- The Case and the Demand
- Cancellation of Registration Does Not Decide the Purchaser’s Claim
- The Purchaser’s Burden Remains
- Why a Connected Documentary Record Matters
- Section 74 Requires More Than an Allegation Against the Supplier
- Cross-Examination: Not an Automatic Ground for Annulment
- Section 75(2): The Demand Was Not Finally Extinguished
- A Necessary Caution About the Tax Period
- Conclusion
Introduction
When a supplier’s GST registration is cancelled retrospectively, the purchaser is often called upon to defend transactions completed much earlier. The purchaser may hold tax invoices, have paid through banking channels and recorded the goods in the books. The Department, on the other hand, may rely on a subsequent inspection reporting that the supplier was not functioning at the declared address. The question is whether that later finding, without examination of the underlying purchases, is sufficient to deny input tax credit.
In Priya Gupta v. Avay Vincent Minz & Others, Appeal No. APL/4/CTT/2026, decided on 28 October 2026, the GST Appellate Tribunal, State Bench, Cuttack, held that retrospective cancellation of the supplier’s registration could not, by itself, establish that the recipient had not received the goods. The Tribunal set aside the adjudication and first appellate orders, but did not grant unconditional credit. It directed the proper officer to determine eligibility on the evidence, treating the Section 74 notice as a notice under Section 73 by applying Section 75(2).
The decision deserves a careful reading. It neither relieves the purchaser of the burden of proving eligibility nor permits the Department to replace investigation with a presumption.
The Case and the Demand
The appeal was heard by Suchismita Misra, Judicial Member, and Ranjan Kumar Sahoo, Technical Member. It concerned input tax credit of ₹8,95,252 on purchases made during January 2018 from M/s Annapurna Enterprises. The first appellate order had confirmed the following amounts:
| Particulars | Amount |
|---|---|
| Input tax credit disallowed | ₹8,95,252 |
| Interest demanded | ₹9,15,364 |
| Penalty imposed | ₹8,95,252 |
The Department alleged that the supplier was a non-existent entity and that the appellant had claimed credit on invoices without receiving the goods. A show cause notice dated 27 December 2021 was issued under Section 74. The adjudicating authority confirmed the demand on 31 May 2022, and the first appellate authority upheld it on 31 July 2024.
The appellant maintained that the purchases were genuine, the goods had been received, payments had been made through banking channels and the transactions were supported by accounting and delivery records. She also relied on the supplier’s return filings and the reflection of the invoices in GSTR-2A. The supplier’s registration was subsequently cancelled on 6 July 2019.
There was, however, a material dispute about the evidence. The appellant asserted that supporting documents had been furnished; the Department denied that adequate proof of actual receipt had been produced. Additional documentary material was also presented before the Tribunal. The decision must therefore not be read as a final finding that every disputed purchase stood proved.
Cancellation of Registration Does Not Decide the Purchaser’s Claim
The Tribunal found that the Department had treated the supplier’s retrospective cancellation as conclusive proof that the appellant’s purchases were fictitious. Its reasoning had effectively proceeded in three steps: the supplier was found non-existent; its registration was cancelled retrospectively; therefore, the appellant could not have received goods from it.
The Tribunal rejected that approach. In paragraphs 24 to 26, it distinguished the statutory power to cancel registration retrospectively from the consequences sought to be imposed on a purchaser. The existence of that power did not mean that every transaction with the supplier could automatically be rejected. The underlying dealings required examination.
The distinction is substantial. A finding concerning the supplier’s registration is relevant to an investigation, but it does not dispense with scrutiny of the recipient’s invoices, movement records, stock entries and other evidence. The Tribunal accordingly directed that retrospective cancellation should not, by itself, be treated as conclusive proof of non-receipt.
The Purchaser’s Burden Remains
The order is equally clear that ITC is conditional. In paragraphs 27 to 35, the Tribunal emphasised compliance with the applicable requirements of Section 16 and the burden imposed by Section 155. The recipient claiming credit must substantiate that claim through appropriate documents and evidence.
A valid GST registration, an invoice uploaded by the supplier or payment through a bank does not, in the Tribunal’s reasoning, remove the need to establish the actual transaction. The Department had relied on State of Karnataka v. Ecom Gill Coffee Trading Private Limited. Although that decision arose under the Karnataka VAT legislation, the Tribunal recognised the relevance of its reasoning concerning proof of genuine purchases and physical movement of goods.
At the same time, Section 155 cannot be used as a reason to disregard the purchaser’s records. Once evidence is produced to substantiate receipt and genuineness, the Department must examine and verify it before reaching a conclusion. The Tribunal found that such verification had not been undertaken in the proceedings before it.
The governing consideration is evidence: the recipient must produce it, and the authority must assess it.
Why a Connected Documentary Record Matters
The appellant’s further submissions sought to trace ten invoices through vehicle particulars, transport statements, stock inward entries, supplier ledgers and payment references. Her case was that the quantities and transaction particulars could be matched across those records. The Department objected to the introduction of additional evidence at the Tribunal stage.
The Tribunal observed that vital evidence of this nature should have been produced during adjudication or at the first appellate stage. Nevertheless, in its final direction, it required the proper officer to consider all evidence, including the additional material produced by the appellant, after granting an appropriate opportunity of hearing.
This part of the order has practical value. A collection of invoices and bank statements is less useful than a transaction-wise explanation showing how the documents relate to one another. The evidentiary approach discussed in the order calls for a connected account of the purchase:
the invoice identifying the goods and quantity;
the transport record linking the consignment to its movement;
the inward or stock entry recording receipt;
the corresponding accounting entry and payment; and
the relevant subsequent stock movement, consumption or sale, where relied upon.
These are not a substitute for the statutory conditions. They are the means by which the factual claim of genuine receipt can be examined. The Tribunal’s direction was to undertake that examination, not to presume the outcome.
Section 74 Requires More Than an Allegation Against the Supplier
The Tribunal separately considered whether the Department had established a basis for proceeding against the recipient under Section 74.
The notice rested on the proposition that, because the supplier was non-existent, the appellant’s ITC was fake and fabricated. The Tribunal found that Section 74 had been invoked mechanically, without a real inquiry into deliberate wrongdoing by the appellant. It held that fraudulent intent could not be inferred merely from the alleged misconduct or non-existence of the supplier.
In paragraphs 40 and 44, the Tribunal placed the responsibility on the Department to set out the relevant facts and cogent reasons supporting fraud, wilful misstatement or suppression. It found the foundation of the notice vague, mechanical and uncorroborated. The original and appellate authorities had likewise failed to examine the evidence before sustaining the demand.
The distinction between the two burdens is important:
| Question | Position adopted by the Tribunal |
|---|---|
| Is the recipient eligible for ITC? | The recipient must substantiate compliance with the applicable statutory conditions. |
| Is Section 74 justified? | The Department must establish the facts supporting fraud, wilful misstatement or suppression against that recipient. |
Failure to prove the ingredients of Section 74 does not necessarily establish entitlement to credit. Conversely, a disputed claim of credit does not, without more, establish fraud. That separation explains both the setting aside of the orders and the direction for redetermination.
Cross-Examination: Not an Automatic Ground for Annulment
The appellant also complained that cross-examination of the officers connected with the report of non-existence had been denied. The Department disputed whether a specific request had been made.
The Tribunal did not accept that denial of cross-examination, by itself, invalidated these proceedings. It distinguished a case substantially dependent on witness statements from one capable of determination through independent documentary evidence. It held that cross-examination is a valuable safeguard, but not a substitute for the recipient’s proof of genuine supplies.
This finding should not be omitted when relying on the decision. The appellant succeeded because of the deficiencies in the investigation, the treatment of retrospective cancellation as conclusive and the unsupported invocation of Section 74—not because the Tribunal recognised an unrestricted right to cross-examination in every ITC dispute.
Section 75(2): The Demand Was Not Finally Extinguished
Having found Section 74 unsustainable, the Tribunal considered the Department’s request to apply Section 75(2). Under that provision, as reproduced in the order, where the specified fraud-related charges are not established, the proper officer is to determine the tax payable by treating the notice as one issued under Section 73(1).
The Tribunal also examined whether the original notice fell within the relevant Section 73 notice period. On the limitation analysis adopted in paragraphs 47 and 48, it held that the notice dated 27 December 2021 was within time for the January 2018 transactions and that Section 75(2) could therefore be applied.
The operative result was:
- The adjudication order dated 31 May 2022 and first appellate order dated 31 July 2024 were quashed, with consequential benefit.
- The Section 74 notice was deemed to be a Section 73 notice.
- The proper officer was directed to determine ITC eligibility in accordance with law.
- All evidence, including the additional evidence, was to be considered after an appropriate hearing.
- Retrospective cancellation alone was not to be treated as proof that the goods had not been received.
The order therefore provides relief from the impugned demand and its unsupported fraud basis, while leaving the substantive credit claim open for determination.
A Necessary Caution About the Tax Period
The disputed purchases belong to January 2018. The order reproduces provisions and refers to records that include later statutory formulations and references to GSTR-2B. Those references should not be read as a direction to apply every later requirement retrospectively. The Tribunal’s ultimate direction is to decide eligibility under the applicable statutory conditions. Its broader extracts should be read subject to that qualification.
Similarly, the limitation conclusion is the conclusion reached on the dates and circumstances of this case. It should not be detached from those facts and treated as a universal deadline for every proceeding concerning financial year 2017–18.
Conclusion
Priya Gupta does not establish that a purchaser is entitled to ITC merely because the supplier was registered when the invoice was issued. Nor does it permit credit to be denied merely because that registration was cancelled later.
Its contribution lies in requiring separate findings on separate questions: whether the goods were actually received, whether the statutory conditions for credit were fulfilled and whether there was evidence of fraud or deliberate suppression by the recipient. The purchaser’s burden of proof remains, but so does the Department’s obligation to investigate, disclose the material relied upon and pass a reasoned order.
For taxpayers and practitioners, the case underlines the value of producing a complete transaction-wise record at the earliest stage. For adjudicating authorities, it makes an equally important point: retrospective cancellation may justify inquiry, but it cannot replace a finding on the transaction itself.
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This article is based on the Tribunal’s order dated 28 October 2026 and is intended for professional discussion and general guidance. The outcome of any other dispute will depend on its evidence, tax period and applicable law.
