GST UPDATE

Appeal No.: APL/89/LCK/2026

Tribunal: GSTAT (Lucknow Bench)

Case Title: Kunwar Mrityunjay (Deputy Commissioner) v. M/s Deepak Lamination

Outcome:Appeal filed by the department was allowed by way of Remand.

Judgement Date: 16.10.2026

QUESTION BEFORE HON’BLE TRIBUNAL:

Whether the appeal filed by the department can be sustainable even if it falls below the monetary threshold limit?
Whether the ITC can be denied when the documentary evidence concerning the movement of goods were not adequately considered?

BRIEF FACTS OF THE CASE:

Based on SIB survey report that the supplier of the M/s Deepak Lamination (hereinafter referred to as respondent) was non-existent , a show cause notice was served to the respondent. Respondent gave reply against the show cause notice, however, the contention made in the reply were not accepted and order was passed by the adjudicating authority. Thereafter, an appeal was preferred before the Appellate authority in which the impugned order was set aside and the Appeal filed by the respondent was allowed. Being aggrieved by the order passed by the Commissioner (Appeals), Department approached the GST Appellate Tribunal, contending that the actual receipt and movement of goods had not been adequately examined.

BRIEF ARGUMENTS BY TAXPAYER - RESPONDENT:

Respondent contended that:
Survey report contention that the supplier was was invalid as the GST portal showed status as valid:

That the department’s appeal was based on the allegation that the seller was non-existent during the SIB survey. However, the supplier continued to hold an active GST registration on the official GST portal which remained uncancelled during the relevant transaction period and thus, the allegation of the absence of the cancellation of the supplier’s registration was factually erroneous and the active registration status could not be disregarded to deny ITC.

ITC cannot be disallowed as the supplier has furnished GSTR-1 and GSTR-3B:

The allegation of the wrongful availment of ITC was contrary to the statutory framework as the supplier had duly discharged the tax liability via filing GSTR-1 and GSTR-3B for the relevant period. Hence, the transactions were genuine and the ITC availed could not be denied merely on the basis of the subsequent survey report.

No mechanism available with the respondent to check whether the supplier had shown the invoice in its return or not:

With regards to the department’s contention that the supplier had filed nil GSTR-1 returns it was contended that the mechanism available to the appellant through GST portal was only to verify the supplier’s registration status and return filing frequency/table. However, no such mechanism exists for the respondent to ascertain whether the supplier had declared the taxable outward supplies or filed NIL returns.

Compliance with Section 16(2)(c) of the Act

Thus, it was argued that as the conditions specified in the Section 16(2)(c) of the CGST Act stood satisfied and that denial of ITC in the absence of evidence establishing the contrary would be unjustified. Reliance was placed upon the judgement in the case of M/s R.T. Infotech v. Additional Commissioner and M/s Clear Secured Service Private Limitred v. The Assistant Commissioner

Submissions by the Appellant - Department:

Respondent failed to discharge burden imposed under Section 155 of CGST ACt:

That the Appellate authority erred in allowing the ITC merely on the basis of existence of the supplier without examining the actual movement and receipt of goods. Respondent failed to discharge the burden imposed under Section 155 read with Section 16(2)(b) of the CGST Act 2017 and could not establish the genuiness of the transactions. The respondent was afforded sufficient opportunities to establish the actual movement of goods since the survey report alleging that the supplier’s registration is cancelled.

Survey report substantiating the fact that the seller was inexistent was produced:

Further that the appellant has also uploaded SIB report against the said seller and discussed the cause for the genuineness of the seller firm.

Allowing availment of ITC on the basis of invoices and payment proofs solely does not make respondent eligible:
Further, that the appellate authority erred in allowing the ITC merely on the basis of tax invoices, electronic reflection of the transactions and payment through banking channels without examining the actual movement and receipt of goods. Further, the supplier was found non-existent at its declared place of business and therefore the respondent was required to establish the actual movement of goods. Actual supply cannot be established merely on the basis that invoices are in existence. The appellate authority failed to properly examine the issue in accordance with CBIC Circular no. 171/03/2022-GST dated 06.07.2022.
Appeal involves question of law and thus should be admitted to be heard on merits:
That the instant appeal merits consideration on merits notwithstanding monetary limit of Rs. 20,00,000/- as provided under Circular no. 207/1/2024- GST dated 26.06.2024 as the matter falls within the exception provided under Para 4(iv)(e) requiring issues involving interpretation of the Act, Rules, notifications, circulars, orders or instructions. As the appeal involves interpretation and application of the Section 16(2)(b).
FINDINGS & JUDGEMENT:
Following are the findings of the Tribunal in the instant case:
Based on the contentions of both the parties, following are the observations and judgment of the Tribunal:
Present matter pertained to the satisfaction of conditions prescribed under Section 16(2)(b) and Section 16(2)(c):

With regards to the appellant’s contention that as the instant appeal involves question of law, hence, same is covered under exclusion of the circular specifying monetary limit. Tribunal observed that based on the analysis of the facts of the case, the instant case pertains to the admissibility of the input tax credit availed by the respondent on the strength of the invoices and the dispute directly relates to the conditions prescribed under Section 16(2) of the CGST Act, 2017, particularly the requirement relating to actual receipt of goods under Section 16(2)(b) of the CGST Act and Section 16(2)(c) regarding payment of tax to the government. Thus, based on this analysis, tribunal decided to hear the appeal on merits.

Appellate authority restricted to the points which were not alleged in SCN:

Tribunal observed that the Appellate authority confined strictly to the point of existence or non-existence of the supplier firm showing their GSTR on portal and concluded that the supplier firm was active and alive at the time of transaction. However, in SCN there was a specific allegation that the only invoices were generated and tax was paid without movement of goods and alleged ITC was claimed.

Condition imposed under Section 16(2)(c) is mandatory to complied with:

It was observed that Commissioner (Appeals) failed to verify the documents which were in the possession of the respondent, particularly, E-way bills and transportation bilties. Reliance was placed upon the decision of the Gujarat High Court in the case of Maruti Enterprises v. Union of India [2026-TIOL-623-HC-AHM-GST] and Sumetco Alloys Pvt Ltd v Union of India (Jaipur High Court) [2026-TIOL-1045-HC-RAJ-GST] and Supreme court decision in the case of Bhandari Scrap Traders v. Union of India [2026-TIOL-32-SC-GST].

Tribunal observed that Section 16 prescribes the eligibility and conditions for availing the ITC. Section 16(2)(b) prescribes actual receipt of goods or services and Section 155 places the burden of proving the eligibility for ITC upon the person claiming such credit. Consequently, respondent was required to substantiate their claim by producing relevant and credible evidence demonstrating that the goods covered by the disputed invoices were actually supplied and received in the course of the business. Tribunal further observed that the issue relating to actual receipt of goods under Section 16(2)(b) is distinct from the issue pertaining to payment of tax to the government under Section 16(2)(c). The condition for complying with the requirement of Section 16(2)(c) is mandatory. For claiming ITC genuiness of the transaction and the actual physical movement of goods are a sine qua non and the aforesaid can be proved only by furnishing the requisite details about the vehicle, selling dealer name and address, freight, acknowledgment of delivery etc.
Status of registration of the supplier does not itself conclusively establish whether actual supply was made or not:
It was held that wherever concession is granted it can only be claimed by the fulfilling the conditions specified under the scheme and ITC is a form of concession granted to the recipient. Reliance was placed upon the judgement of Punjab and Haryana High Court in the case of Shaurya Alloys pvt Ltd v State of Punjab and Another 2026-TIOL-1129-HC-P&H-GST these submissions are relevant to the examination of the claim, however, the existence of a valid GST registration , the issuance of invoices and payment of consideration through banking channels cannot in isolation, conclusively establish the actual receipt of goods where the genuineness of the underlying supplies is actually disputed. Further, merely because supplier was not available at its declared place of business during a subsequent investigation does not by itself conclusively establish that no goods were supplied. Further, The evidentiary significance of the SIB report must be assessed in the context of the relevant dates, the nature and scope of the investigation. Thus, the claim of ITC must be examined on the basis of the cumulative effect of the evidence and the applicable statutory requirements.
Appellate authority was required to do verification of the documents placed on record:
Appellate authority and adjudicating authority were required to record specific and reasoned findings regarding the movement of goods. Further, that the respondent had clearly mentioned at the SCN stage about the documents depicting the movement of goods. However, adjudicating authority failed to make any proper consideration of the said documents and also failed to produce cogent reasons as to why the documentary evidence furnished by the respondent was unreliable.
As the movement of goods was contested by the adjudicating authority, therefore, same was to be verified:
Adjudicating authority invoked section 74 of the CGST Act not only on the ground that the supplier firm was allegedly non-existent but also on the allegation that the purchasing firm had wrongly availed ITC without the actual movement of goods. It was held that said aspect though relevant, could not by itself be determinative of the respondent’s entitlement to ITC and that the appellate authority was required to undertake an independent and comprehensive examination of the claim of the ITC in the light of the applicable provisions of Section 16 of the CGST Act, 2017. The movement of goods wherever material to the dispute, is required to be assessed on the basis of evidence available on record, including tax invoices, e-way bills, transportation documents and other corroborative material as well as the judicial pronouncements of the Hon’ble High Courts. In the present case, neither the Order-in-original nor the Order-in-appeal reflects an adequate and reasoned examination of the documentary evidence.
No material available which substantiates the fact that the documents were verified:
Thus, it was held that the material placed on record has not been dealt with in a manner that enables this bench to ascertain whether the conclusions arrived at by the authorities below are legally sustainable. In view of the above the impugned order-in-original and the order-in-appeal are not sustainable and it was held that matter warrants consideration by the adjudicating authority after proper verification and evaluation of the relevant documentary evidence and after affording the respondent an opportunity of hearing.
Order remanded for fresh proceedings:
The impugned order-in-appeal was set aside and the matter was remanded to the adjudicating authority for fresh adjudication in accordance with law. Authority shall also examine the fulfilment of the applicable statutory conditions for the availment if ITC and record specific, clear and reasoned findings on the issues involved.
Respondent shall be afforded a reasonable and effective opportunity to produce all relevant documents and supporting evidence concerning the transactions and the movement of goods. The respondent is directed to place such documents before the adjudicating authority for consideration during the fresh adjudicartion proceedings.

Author’s Comment:

The judgment presumes significant importance as it enforces the principle that ITC can be availed by the appellant only if he possesses valid documents like invoices, payment proof and movement evidences and the tax is paid to the government by the supplier. While the burden of establishing ITC eligibility rests upon the recipient, the adjudicating authority must examine the supporting evidence and record clear findings instead of relying solely upon the supplier’s alleged non-existence.
The intent is clear: if the purchaser is bona fide and can prove the actual movement and receipt of goods, ITC cannot be denied merely because of the supplier’s default. In this regard, reliance can be placed upon the judgment of the High Court of Punjab and Haryana in Shaurya Alloys Pvt. Ltd. v. State of Punjab and Another (CWP No. 34296 of 2024), wherein the Court, while laying down 14 guidelines governing ITC denial, specifically held in its second guideline that the Department ought to proceed against the defaulting supplier for recovery of tax, interest and penalty instead of routinely requiring the bona fide purchaser to reverse ITC.
At the same time, the purchaser is not absolved merely because the supplier’s registration was active or payment was made through banking channels. The actual movement and receipt of goods must also be proved to establish the genuineness of the transaction.

Based on above, the appeal filed by the appellant was allowed.
CA Pradeep Jain_

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GST update /2026-27/0107

GST UPDATE

QUESTION BEFORE HON’BLE TRIBUNAL:

BRIEF FACTS OF THE CASE:

BRIEF ARGUMENTS BY TAXPAYER - RESPONDENT:

Submissions by the Appellant - Department:

Author’s Comment:

Opinion

Author’s Comment:

At the same time, the purchaser is not absolved merely because the supplier’s registration was active or payment was made through banking channels. The actual movement and receipt of goods must also be proved to establish the genuineness of the transaction.Author’s Comment:

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