AI Overview...
Nonexistent Supplier - Summary of Main Points and Insights
Main Points and Insights
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Legal Basis and Nature of Cases:
Several sources discuss cases where input tax credits (ITC) were challenged due to the involvement of suppliers later found to be nonexistent or fictitious. The courts have examined whether claims based on invoices from such suppliers are valid, emphasizing the importance of genuine transactions. For example, Rajeev Traders, Represented By Its Proprietor, Sri. Rajeev Ranjan VS Union of India, Through Its Secretary, Ministry of Finance, Department of Revenue, Room No. 137, North Block, New Delhi - Karnataka clarifies that supply laws do not mandate supply at market value and highlights cases involving dummy suppliers under Section 130 of the CGST Act. -
Existence and Validity of Suppliers:
The core issue across multiple cases (Rajshi Processors, Raebareli Having Office Thru. Its Partner Ashok Kumar Lakhotia VS State Of Uttar Pradesh Thru. Prin. Secy. Deptt. Of State Tax Govt. Lko. - Allahabad, M/S. BRIGHT STAR PLASTIC INDUSTRIES vs ADDL. COMMNR. OF STATE TAX(APPEAL) - Orissa, Tvl. Sri Balaji Trading Company vs The Assistant Commissioner (ST) (FAC), Hosur - Madras, M/S Rajshi Processors Raebareli Thru. Its Partner Ashok Kumar Lakhotia vs State Of U.P. Thru. Prin. Secy. Deptt. Of State Tax,Lko. And 2 Others - Allahabad) is whether suppliers were real and whether the petitioner provided sufficient proof of actual receipt of goods. Courts have found that mere possession of invoices or GST registration at the time of transaction does not automatically confirm the genuineness of the supplier or the transaction. -
Genuineness of Invoices and Transactions:
Several judgments (Tvl. Sri Balaji Trading Company vs The Assistant Commissioner (ST) (FAC), Hosur - Madras, Rajshi Processors Raebareli Thru. Its Partner Ashok Kumar Lakhotia VS State Of Uttar Pradesh Thru. Prin. Secy. Deptt. Of State Tax,Lko. - Allahabad) emphasize that invoices from non-existent or fake suppliers, especially when the supplier’s GSTIN is later canceled or the supplier is proved to be fictitious, undermine the validity of ITC claims. The courts have held that reliance on invoices alone is insufficient without supporting evidence of actual receipt of goods. -
Impact of Supplier Registration Cancellation:
Courts have clarified that cancellation of GST registration does not automatically invalidate prior bona fide purchases (Multi Metal Industries vs Assistant Commissioner Ghatak - Gujarat). However, if the supplier is found to be nonexistent or fraudulent, the ITC claimed based on their invoices can be disallowed or reversed. -
Procedural and Evidentiary Considerations:
The courts have scrutinized whether the petitioner could substantiate receipt of goods and whether due diligence was exercised in verifying suppliers. In cases like Rajshi Processors, Raebareli Having Office Thru. Its Partner Ashok Kumar Lakhotia VS State Of Uttar Pradesh Thru. Prin. Secy. Deptt. Of State Tax Govt. Lko. - Allahabad and Amarnath Trading Company VS State of U. P. - Allahabad, failure to prove actual receipt or to establish supplier existence led to the disallowance or blocking of ITC. -
Legal and Fair Hearing Principles:
The courts have upheld that even if suppliers are later found to be non-existent, bona fide purchases made when the supplier was registered can sometimes be protected, provided the taxpayer demonstrates genuine transactions (Multi Metal Industries vs Assistant Commissioner Ghatak - Gujarat).
Analysis and Conclusion
The overarching principle from these cases is that the validity of ITC claims hinges on the actual receipt of goods and the genuineness of suppliers, not merely on the presence of invoices or GST registration at the time of transaction.
Claims based on invoices from nonexistent or fake suppliers are generally disallowed, especially when evidence suggests the supplier did not exist or the transaction was fraudulent. However, if the taxpayer can prove genuine receipt of goods and that the supplier was valid at the time of transaction, courts may uphold the ITC claim, even if the supplier's registration is later canceled or if the supplier is found to be fictitious subsequently (Multi Metal Industries vs Assistant Commissioner Ghatak - Gujarat, M/S Rajshi Processors Raebareli Thru. Its Partner Ashok Kumar Lakhotia vs State Of U.P. Thru. Prin. Secy. Deptt. Of State Tax,Lko. And 2 Others - Allahabad).
References:
- Rajeev Traders, Represented By Its Proprietor, Sri. Rajeev Ranjan VS Union of India, Through Its Secretary, Ministry of Finance, Department of Revenue, Room No. 137, North Block, New Delhi - Karnataka
- Rajshi Processors, Raebareli Having Office Thru. Its Partner Ashok Kumar Lakhotia VS State Of Uttar Pradesh Thru. Prin. Secy. Deptt. Of State Tax Govt. Lko. - Allahabad
- M/S. BRIGHT STAR PLASTIC INDUSTRIES vs ADDL. COMMNR. OF STATE TAX(APPEAL) - Orissa
- Tvl. Sri Balaji Trading Company vs The Assistant Commissioner (ST) (FAC), Hosur - Madras
- M/S Rajshi Processors Raebareli Thru. Its Partner Ashok Kumar Lakhotia vs State Of U.P. Thru. Prin. Secy. Deptt. Of State Tax,Lko. And 2 Others - Allahabad
- Rajshi Processors Raebareli Thru. Its Partner Ashok Kumar Lakhotia VS State Of Uttar Pradesh Thru. Prin. Secy. Deptt. Of State Tax,Lko. - Allahabad
- PRAYAGRAJ DYEING & PRINTING MILLS PVT LTD vs UNION OF INDIA - Gujarat
- Multi Metal Industries vs Assistant Commissioner Ghatak - Gujarat
- Amarnath Trading Company VS State of U. P. - Allahabad
Search Results for "Nonexistent Supplier"
2022 0 Supreme(Kar) 395 • India - Karnataka
N.S.SANJAY GOWDA
no law which demands that supply of goods should be made only at a market value - In fact, in business, rate at which goods are supplied ... He also submitted that this was a case of a nonexistent dummy supplier and a recipient, and therefore the proceedings invoked under Section 130 of the CGST Act could not be found fault with. 17. ... There were nonexistent suppliers and recipient which was discovered during the investigation and follow-up searches. 110. ... The fifth ground that there was a #HL_STA....
2024 0 Supreme(All) 851 • India - Allahabad
SUBHASH VIDYARTHI
Issues: Whether the petitioner was entitled to input tax credit despite the subsequent discovery that the supplier ... Court: The court found that the petitioner failed to substantiate claims of receiving goods from the alleged suppliers ... It has further been stated in the grounds of the review petition that “this Court has blindly believed the stand of the revenue that the seller/supplier firm were nonexistent and bogus firms, which is a grave mistake and an omission committed by the respondent at the time of hearing ....
• India - Orissa High Court
have claimed ITC (Input Tax Credit) of Rs.2,04,650,06 against aggregating to Rs.3,48,066/- on the ground that the ‘ITC claimed was against fake invoices issued by nonexistent
2025 Supreme(Online)(Mad) 45693 • India - IN THE HIGH COURT OF JUDICATURE AT MADRAS
Mr.Justice Krishnan Ramasamy, J
from a purported fictitious supplier. ... India - Article 226 - Writ of Certiorari - Challenge to the order regarding Input Tax Credit - Petitioner alleging non-existent supplier ... ... ... Issues: The main issue revolves around whether the claim for ITC based on invoices from a reputed supplier was valid or unjustly
2024 Supreme(Online)(ALL) 3374 • India - High Court of Allahabad (Lucknow Bench)
Subhash Vidyarthi, J
petitioner challenges an order imposing tax liability and penalty for false input tax credit claims, based on findings of non-existent supplier ... -19) ... ... (C) Fraudulent Claims - Established that the petitioner relied on transactions with non-existent suppliers ... The supplier firms were having valid GSTIN registration when the petitioner had received the supplies. In case GSTIN registration of the firm is cancelled subsequently, the petitioner cannot be penalized for the same. ... of goods or services or both, ....
2025 Supreme(Online)(ITAT) 5103 • India - Income Tax Appellate Tribunal (Chandigarh Bench)
KRINWANT SAHAY, AM, RAJPAL YADAV, VP
... ... Issues: Whether the lack of supplier verification warrant disallowance of genuine purchases under circumstances where evidence ... GST returns, invoices, and banking transactions - CIT(A) sustained a portion of disallowance due to doubts raised over certain suppliers ... (Paras 1-24) ... ... (B) Principle of Locus Standi - Even if suppliers did not respond to notices ... Counsel of the assessee also stated that the GST Registration was valid at the time of generation of 'e-way bill' and that the assessee had purchased the, good....
2024 0 Supreme(All) 786 • India - Allahabad
SUBHASH VIDYARTHI
The existence of a valid GST registration at the time of transaction does not guarantee entitlement to ITC if the supplier is later ... ' GST registrations and the findings that the suppliers were non-existent. ... : The court found that the petitioner failed to substantiate the actual receipt of goods from the alleged suppliers ... The contention that no supplies had been received from the nonexistent firms also finds support from the fact that the goods receipts issued by M/s Goyal Goods Carry Corpora....
• India - Gujarat High Court
BHASKAR BHATTACHARYA, CJ, J.B.PARDIWALA, J
4.5, 9 and 10) ... ... Facts of the case: ... The appellants received grey fabrics on endorsed invoices from registered suppliers ... The said supplier traders/merchants made payment of the process charges etc. and the said supplier traders'/merchants' names and addresses are also recorded. ... In such a case, the Division Bench of the Bombay High Court held that it was immaterial that merchant-exporter had received a genuine invoice from the supplier and Range Superintendent had issued a certificate of payment o....
2025 0 Supreme(Guj) 1632 • India - IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Bhargav D.Karia, Pranav Trivedi
... ... Ratio Decidendi: The court concluded that mere cancellation of supplier registrations does not negate bona fide purchases ... of natural justice were upheld in the adjudication process and if the reversal of Input Tax Credit was justifiable in light of supplier ... existing evidence undermines the principles of fair hearing, yet noted that the petitioner did not adequately prove the genuineness of supplier ... has also not filed any affidavit of any supplier that the supplier was existent or th....
2024 0 Supreme(All) 1852 • India - Allahabad
SAUMITRA DAYAL SINGH, MANJIVE SHUKLA
, who was found non-existent at the disclosed business address - The supplier had applied for a change of address just four days ... Blocking of Input Tax Credit (ITC) - The Assistant Commissioner blocked ITC of Rs. 53,61,832/- on grounds of non-genuineness of supplier ... ) ... ... Facts of the case: ... The petitioner challenged the blocking of ITC by the Assistant Commissioner, who found the supplier ... The only reason to block ITC is the satisfaction recorded by the respondent no.3 that the said ITC was not genuine since the #HL_S....
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