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CTT (GST Department) vs Shanti Kirana India Ltd – Supreme Court Judgment on ITC
Case Background

Shanti Kirana India Ltd had purchased goods from registered suppliers and claimed Input Tax Credit (ITC) on the basis of valid tax invoices. Later, the GST Department alleged that the supplier did not deposit GST with the government and therefore proposed to deny ITC to the buyer.

The department argued that since the tax was not actually paid by the supplier, the recipient was not entitled to claim credit.

Key Issue Before the Supreme Court

Can ITC be denied to a genuine purchaser if the supplier defaults in paying GST to the government?

Supreme Court Observation

The Hon’ble Supreme Court clearly held that:

A bona fide purchaser who has complied with all statutory requirements cannot be penalized for the supplier’s default.

If the buyer:

Received goods/services,

Possesses valid tax invoices,

Made payment including GST,

Filed returns properly,

then ITC cannot be denied merely because the seller failed to deposit tax.

Important Legal Principle Laid Down

The Court emphasized:

“Tax authorities should recover unpaid tax from the defaulting seller, not from the honest buyer.”

The burden of recovery lies with the supplier, not the recipient who acted in good faith.

Impact of This Judgment

This judgment provides strong protection to taxpayers:

✅ Safeguards genuine businesses
✅ Prevents arbitrary ITC denial
✅ Promotes certainty in GST compliance
✅ Strengthens the principle of natural justice

Conclusion

The Supreme Court made it clear that:

ITC is a vested right of a bona fide buyer and cannot be denied due to supplier’s fault when the buyer has fulfilled all legal conditions.

This ruling is a major relief for honest taxpayers and reinforces trust in the GST system.