Note: This summary is illustrative of how case-law updates are presented. Replace the court, order number and date with the actual citation before publishing.
The question
Whether a recipient's input tax credit can be reversed solely on the ground that the supplier did not deposit the collected tax — where the recipient has a genuine transaction, a valid invoice, and proof of payment to the supplier.
The holding
The Court held that, in a genuine transaction, the department should ordinarily proceed against the defaulting supplier first. Credit should not be mechanically reversed in the recipient's hands without examining bona fides, where the recipient has discharged its obligations.
Why it matters
- It offers a defence against automatic ITC reversal driven by 2B mismatches alone.
- It places weight on genuineness and documentation — invoice, payment, e-way bill, delivery.
- It is fact-dependent and does not dilute the recipient's own due-diligence obligations.
Practical takeaway
Keep the evidence of genuineness for every material purchase — invoice, proof of payment, transport and delivery records. If credit is challenged purely on a supplier's default, that evidence is the foundation of the reply.
Our monthly ITC reconciliation playbook sets out the routine that keeps this documentation in place.
This is general guidance, not advice on a specific transaction. For your situation, talk to a specialist.