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GST Can not be demanded from the Purchasing Dealer for bonafide purchases of Goods even in case of Registration of the Supplier is cancelled from Retrospective effect- Another Case Decided by Hon'ble Allahabad High Court in favour of Assessee- Proceedings u/s 74 quashed
Category: GST, Posted on: 08/12/2025 , Posted By: CA SOHRABH JINDAL
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GST Can not be demanded from the Purchasing Dealer for bonafide purchases of Goods even in case of Registration of the Supplier is cancelled from Retrospective effect- Another Case Decided by Hon'ble Allahabad High Court in favour of Assessee- Proceedings u/s 74 quashed

  1. Allahabad High Court in M/s Saniya Traders v. Addl. Commissioner (Writ Tax 1743/2024, decided 03.12.2025) quashed section 74 proceedings against the purchasing dealer and allowed ITC.Sanjay-Traders-ALL-HC-2025.pdf​

  2. Purchases were from a registered supplier (Mohan Enterprises, Bihar); supplier had filed GSTR‑1 and GSTR‑3B up to July 2021 and tax was paid through banking channel and deposited with the department.Sanjay-Traders-ALL-HC-2025.pdf​

  3. Court noted that once GSTR‑1 is filed, GSTR‑2A auto-populates and window for GSTR‑3B opens; these auto-populated forms and the fact of tax payment were not disputed by the department in the orders.Sanjay-Traders-ALL-HC-2025.pdf​

  4. Department’s allegation was of “fake invoices without movement of goods” based on investigation in another State, but there was no specific finding that tax on the impugned transaction was not deposited by the selling dealer.Sanjay-Traders-ALL-HC-2025.pdf​

  5. High Court held that when seller is registered at the time of transaction, has filed GSTR‑1 and GSTR‑3B, tax stands deposited and buyer has paid through banking channels, ITC of the purchaser cannot be denied merely on subsequent cancellation of supplier’s registration.Sanjay-Traders-ALL-HC-2025.pdf​

  6. Court relied on its earlier decisions in Solvi Enterprises, Khurja Scrap Trading Co., Safecon Lifescience and on Supreme Court ruling in Shakti Kiran India (P) Ltd., all holding that bona fide purchasers should not be penalised when selling dealer was registered and tax stands paid.Sanjay-Traders-ALL-HC-2025.pdf​

  7. It was reiterated that section 74 can be invoked only where ITC is wrongly availed/used due to fraud, wilful misstatement or suppression; in absence of such ingredients against the purchaser, section 74 demand is unsustainable.Sanjay-Traders-ALL-HC-2025.pdf​

  8. Observation against the buyer that it failed to prove seller’s tax payment was held contrary to record, because payment of tax by seller and reflection in GSTR‑2A/3B were already on record and not disputed.Sanjay-Traders-ALL-HC-2025.pdf​

  9. Judgment reinforces principle: purchaser’s ITC cannot be denied when (a) seller was registered on transaction date, (b) invoices and e‑way bill exist, (c) returns GSTR‑1 & 3B are filed, (d) tax is deposited with exchequer, and (e) payment is through banking channel.Sanjay-Traders-ALL-HC-2025.pdf​

  10. Practical takeaway for professionals: in “fake invoice/no movement” disputes, strongly rely on GSTR‑2A/3B trail, banking payments, and status of seller’s registration on transaction date, and cite Saniya Traders (All HC 2025) with Shakti Kiran India (SC) to defend genuine buyer’s ITC.Sanjay-Traders-ALL-HC-2025.pdf


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