ITC cannot be denied to bona fide recipient for supplier's failure to deposit tax with the Government

Last updated: 29 June 2026

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Quick Summary

The Gauhati High Court has ruled that a genuine business buyer should not be denied Input Tax Credit (ITC) simply because their supplier failed to pay the collected tax to the government. The court stated that the tax authorities should pursue the defaulting supplier directly, rather than penalising the honest buyer who has fulfilled all their legal obligations. This decision aims to protect businesses that have acted in good faith and complied with all regulations.

Court :
Gauhati High Court

Brief :
The Hon'ble Gauhati High Court in M/s Metal Syndicate and Another v. The Union of India & Ors. [W.P.(C) No. 2960/2026 dated June 05, 2026] set aside the Order-in-Original and the Order-in-Appeal confirming GST demand of Rs. 78,70,952/- along with interest and equivalent penalty, and held that a bona fide purchasing dealer cannot be denied Input Tax Credit ("ITC") merely on account of the supplier's failure to deposit the tax collected with the Government. The Court reiterated that the Department's remedy in such circumstances lies against the defaulting supplier and not against the genuine recipient, who has discharged all statutory obligations.

Citation :
W.P.(C) No. 2960/2026 dated June 05, 2026

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Attached File : 671907_6027_metal_syndicate_ors.pdf

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Judgement posted by

Bimal Jain

Service

FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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