Court rules in favor of Adboulevard Media, confirming ITC entitlement when transactions are conducted in good faith during seller's active registration period.
In a significant ruling, the Allahabad High Court has upheld the entitlement of Adboulevard Media Private Limited to claim Input Tax Credit (ITC) under the Goods and Services Tax (GST) framework, despite the subsequent cancellation of the seller's registration. The decision, rendered by Justice Piyush Agrawal, reaffirms the principle that a purchaser's ITC claim remains valid if the transaction was conducted in good faith while the seller was registered.
The case arose when Adboulevard Media, engaged in digital and online advertising, sought a refund of ITC for the period between April 2024 and June 2024. The refund application was partially approved, with authorities denying a portion of the claim, attributing it to the untraceability of the seller, Addtech Infinium Pvt. Ltd., whose registration was later canceled on November 6, 2024.
Justice Agrawal's judgment emphasized that a subsequent cancellation of a seller's registration does not invalidate the ITC claims of a purchaser if the transaction occurred during the seller's active registration period. The restoration of the seller's registration further reinforced the validity of the transactions in question, negating any adverse inference against Adboulevard Media.
The court also criticized the tax authorities for their failure to verify essential details on the GST portal, such as the filing of GSTR-1A and GSTR-3B, and the taxes deposited by the seller before denying ITC to the purchaser. In light of the Supreme Court's precedent in the case of Commissioner Trade Tax v. Shanti Kiran India Pvt. Ltd., the court quashed the impugned orders, directing a refund of any amount deposited by Adboulevard Media in relation to the disputed ITC claim.
This judgment reinforces the legal position that bona fide purchasers who transact in good faith with registered sellers are entitled to ITC benefits, regardless of later developments affecting the seller's registration status.
Bottom Line:
GST - Input Tax Credit (ITC) claim cannot be denied to a purchaser when the seller's registration is subsequently cancelled after the transaction was conducted in good faith during the period when the seller was registered.
Statutory provision(s): Goods and Services Tax Act (GST), Input Tax Credit (ITC) provisions, GST Portal verification requirements.
