Supreme Court to decide Denial of ITC Due to Seller's Registration cancelled retrospectively

The Hon'ble Supreme Court in Roshan Sharma v. Deputy Commissioner of Revenue, State Tax &Anr. [SLP(C) No. 31296/2025, order dated November 10, 2025] held that the question of whether Input Tax Credit (ITC) can be denied solely on the ground that the GST registration of the seller has been cancelled-despite the registration being valid on the date of transaction-requires consideration. The Supreme Court issued notice and stayed the operation of the impugned High Court order, which had denied relief to the petitioner citing the availability of alternative remedy before the Commissioner, GST.​

Facts:

Roshan Sharma ('the Petitioner'), a registered dealer, purchased goods from a supplier, whose GST registration was cancelled retrospectively.

The Deputy Commissioner of Revenue, State Tax, West Bengal ('the Respondent') raised demand for tax, interest, and penalty on the Petitioner, denying ITC on the ground that the seller's GST registration was subsequently cancelled.

The Petitioner contended that denial of ITC is unsustainable as the cancellation of the seller's registration was with retrospective effect, and on the date of supply, the registration was in force. The Petitioner also challenged the denial of an effective opportunity to rebut departmental allegations, including requests for cross-examination of the supplier and transporter, and for access to crucial Fastag data to establish movement of goods.​

The Respondent contended that the Petitioner had an effective alternative remedy by way of statutory appeal and that denial of ITC is justified based on retrospective cancellation and departmental evidence, including witness statements and alleged document discrepancies.​

Aggrieved by the adjudication order (Order-in-Original), and the subsequent High Court order declining relief on grounds of alternative remedy and factual disputes, the Petitioner approached the Supreme Court via a Special Leave Petition under Article 136 of the Constitution of India, seeking redress against denial of ITC.​

Issue:

Whether ITC can be denied to a purchaser when the GST registration of the selling dealer has been cancelled with retrospective effect, although the registration was valid on the date of supply, and whether denial of opportunity for cross-examination and access to evidentiary material (such as Fastag data) vitiates the adjudication process?

Held

The Hon'ble Supreme Court in SLP(C) No. 31296/2025 held as under:

· Directed that, in the interim, notice be issued returnable in December 2025 and recorded that the submissions require consideration by the Supreme Court.

The Hon'ble High Court held as under

· Observed that, it prima facie, declined to grant relief to the Petitioner on grounds of the alternative remedy of appeal before the GST Commissioner.​

· Noted that, the principal submission by the Petitioner is that ITC cannot be denied merely because of retrospective cancellation of the supplier's registration, especially when valid at the time of transaction. Further it did not decide the substantive issue of ITC denial on merits, but only on maintainability in light of alternate remedies.

Our Comments:

The present case raises substantial questions regarding the denial of ITC due to retrospective cancellation of the supplier's GST registration. The High Court of Calcutta, in its earlier order in M.A.T. 854 of 2024 judgment dated May 7, 2024, had specifically quashed the Order-in-Original on grounds of violation of natural justice-namely, failure to provide copies of witness statements and denial of cross-examination-and remanded the matter for fresh adjudication after supplying the requisite materials and permitting rebuttal evidence.​

Upon remand, the Adjudicating Authority reiterated its demand, leading the Petitioner to challenge the order before the High Court again. The High Court order in M.A.T. 1212 of 2025 dated August 28, 2025, declined to entertain the writ petition, emphasizing the availability of statutory appeal under Section 107 of the CGST Act as an efficacious remedy, and explicitly directed the Petitioner to avail such remedy while preserving the right to present all factual and legal issues (including Fastag records, witness statement challenges, etc.) before the appellate authority. Thus, none of the orders on merits adjudicate the core issue-whether ITC denial is justified when registration is cancelled retrospectively.​

The Supreme Court's interim order, of issuing notice to the Respondents recognizes the necessity to consider the scope of denial of ITC under such circumstances, as well as procedural fairness in GST adjudication.​

Relevant Provisions:

Section 107 of the CGST Act, 2017

"107. Appeals to Appellate Authority.-

(1) Any person aggrieved by any decision or order passed under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person."

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED