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Punjab & Haryana High Court Lays Down Guidelines for Denial of ITC October 16, 2026
Published in: Alerts
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In a batch of 424 writ petitions, the Punjab and Haryana High Court upheld the constitutional validity of Section 16(2)(c) of the CGST Act, 2017, while holding that Input Tax Credit (“ITC”) cannot be denied to a purchasing dealer mechanically merely because the supplier has failed to deposit tax with the Government or its GST registration has been cancelled retrospectively.
The Court emphasised that the Department must undertake a fact-specific inquiry, establish a direct link between the purchasing dealer and the alleged default or fraudulent conduct, and disclose the material relied upon in the show cause notice. It also laid down detailed guidelines governing ITC denial, invocation of Section 74, retrospective cancellation of registration and prevention of double recovery.
The judgment provides significant relief to genuine purchasing dealers and reinforces procedural safeguards in GST proceedings, while retaining the burden on taxpayers to establish ITC eligibility through appropriate documentary evidence.
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