Assessee Cannot Be Held Liable for Cancellation of Selling Dealer’s Registration Post-Transaction as All Transactions Were Available in GSTR-2A | HC

Case Details: Solvi Enterprises. v. Additional Commissioner Grade 2 - [2025] 173 taxmann.com 25 (Allahabad)

Judiciary and Counsel Details

• Piyush Agrawal, J.
• Aditya Pandey, for the Petitioner.
• Manish Trivedi for the Respondent.

Facts of the Case

The petitioner challenged the demand order issued under Section 74 of the CGST/UPGST Act, wherein input tax credit (ITC) was denied on the ground that the registration of the selling dealer was cancelled. The petitioner had purchased goods from a registered dealer whose registration was subsequently cancelled. The tax invoice was generated through the GST Portal, the seller had filed returns, and Form GSTR-2A was auto-populated, showing that the transaction was duly recorded in the GST system.

The petitioner contended that at the time of the transaction, the seller was a validly registered dealer, and mere subsequent cancellation of registration could not be a ground to deny ITC. It was also argued that the tax had been paid by the seller through Form GSTR-3B and was reflected in Form GSTR-2A, which was accessible to the purchaser. However, the adjudicating authority and the appellate authority failed to examine these material facts and passed the impugned orders without proper verification or appreciation of the GST filings.

High Court Held

The High Court held that since the seller was registered on the date of the transaction and the relevant returns i.e. Form GSTR-1 and Form GSTR-3B were filed, the transaction was genuine. The authorities failed to verify the GST portal records regarding tax payment and instead drew adverse inferences without basis. Accordingly, the Court quashed the impugned demand and appellate orders, and remanded the matter to the adjudicating authority for fresh consideration in accordance with law.

List of Cases Reviewed

• Rama Brick Field v. Additional Commissioner Grade-2 & ors., Writ Tax No. 909 of 2022, relied on.
• Rajshi Processors v. State of U.P. & Ors., Writ Tax No. 128 of 2024
• Shiv Trading v. State of UP & Ors., Writ Tax No.1421 of 2022, distinguished

List of Cases Referred to

• State of Karanataka v. Ecom Gill Coffee Trading Private Limited Writ Tax No. 128 of 2024 (para 10)
• (M/s Rajshi Processors Raebareli Thru. Its Partner Ashok Kumar Lakhotia v. State of U.P. Thru. Prin. Secy. Dept. Of State Tax, Lko and Writ Tax No.1421 of 2022 (para 10).