The Supreme Court of India, in the interim order of Roshan Sharma v. Deputy Commissioner of Revenue, State Tax & Anr., has issued notice and stayed the High Court's order, agreeing to consider the validity of Input Tax Credit (ITC) denial solely because of the retrospective cancellation of a supplier's GST registration. The case also centrally addresses the violation of natural justice due to the denial of cross-examination and access to crucial evidence like Fastag data.

SC Takes Up Challenge to Retrospective GST Cancellation Impacting Buyer's ITC

This report focuses on the significant interim order passed by the Hon'ble Supreme Court of India on November 10, 2025, in the Special Leave Petition (C) No. 31296/2025. The ruling addresses a contentious issue with far-reaching consequences for businesses under the Goods and Services Tax (GST) regime: the denial of Input Tax Credit (ITC) based on the retrospective cancellation of a seller's GST registration.

The Central Dispute: Retrospective Cancellation vs. Buyer's Eligibility

The core legal question before the Supreme Court is whether a purchaser can be lawfully denied ITC when the supplier’s GST registration was valid and active on the date of the transaction, but was subsequently cancelled with retrospective effect by the Tax Authorities. The dispute stems from the following:

• Petitioner's Stance: The Petitioner, Roshan Sharma, argues that the ITC denial is unsustainable as the transaction was bona fide and all legal prerequisites were met on the date of supply.
• Procedural Fairness: The Petitioner also challenged the adjudication process, citing a violation of natural justice due to the refusal of requests for cross-examination of departmental witnesses (supplier and transporter) and the withholding of access to crucial Fastag data needed to prove the movement of goods.
• Respondent's Stance: The Deputy Commissioner justified the denial based on the retrospective cancellation and countered the writ petition by asserting the availability of an effective alternative remedy under Section 107 of the CGST Act, 2017.

The High Court's Opinion: Use the Normal Appeal Process First

The Hon'ble High Court, in its subsequent order (M.A.T. 1212 of 2025), prima facie declined to grant relief to the Petitioner. This decision primarily relied on the doctrine of alternative remedy, directing the Petitioner to pursue the statutory appeal before the GST Commissioner.

Significantly, the High Court did not adjudicate the substantive question of ITC denial on its merits but preserved the Petitioner's right to raise all factual and legal submissions, including evidence related to Fastag records and procedural integrity, before the Appellate Authority.

Supreme Court's Critical Intervention

The Supreme Court’s interim order dated November 10, 2025, marks a critical development, effectively challenging the High Court's stance on maintainability:

• Issuance of Notice: The Court formally issued notice to the Respondents, acknowledging the need for their detailed response.
• Recognition of Gravity: The Court explicitly recorded that the legal submissions presented by the Petitioner "require consideration by the Supreme Court." This signals the apex court's recognition of the significant legal impact and widespread implication of the issue.
• Stay on High Court Order: The Supreme Court stayed the operation of the impugned High Court order, thereby granting immediate interim relief and preventing coercive recovery based solely on the High Court's ruling on the non-maintainability of the writ petition.

Conclusion 

The Supreme Court's decision to intervene and stay the High Court's order indicates that the core questions regarding retrospective ITC denial and the adherence to procedural fairness (natural justice) in GST adjudication are matters of fundamental legal importance that necessitate final determination at the apex level.

The final judgment in this case is highly anticipated and is expected to establish a definitive legal framework protecting bona fide purchasing dealers from penalties arising solely out of subsequent retrospective actions taken against their suppliers.

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