Short Summary
M/s. Cart Infralog Ltd. & Anr. filed a writ petition before the Calcutta High Court challenging a Show Cause Notice dated 11.06.2025 issued under Section 74 of the CGST Act, 2017, and the consequential Order in Original dated 09.12.2025, alleging ineligible and irregular Input Tax Credit (ITC) of approximately Rs. 2.37 crores with total interest and penalty aggregating to Rs. 6.3 crores. The petitioners contended that the defaulting supplier (M/s. Aster Trading Company) who failed to file GSTR-3B should be held liable, not the purchasing dealer, relying on the Division Bench decision in Suncraft Energy Pvt. Ltd. (affirmed by the Supreme Court on 14.12.2023). The Court quashed the Order in Original and the recovery notice, directed reconsideration of the matter in light of the cited precedents, and required the petitioners to deposit Rs. 10,00,000/- as a condition for remand.
Detailed Summary
The petitioners, M/s. Cart Infralog Ltd. & Anr., filed a Writ Petition (WPA 16556 of 2025) before the Calcutta High Court challenging inter alia the Show Cause Notice dated 11.06.2025 issued under Section 74 of the Central Goods & Services Tax Act, 2017 for the Financial Years 2018-19, 2019-20, and 2023-24, along with the consequential Order in Original dated 09.12.2025 passed during the pendency of the Writ Petition. The respondents included the Additional Commissioner, HQ Anti-Evasion Unit, CGST & CX, Kolkata South Commissionerate and others.
The Show Cause Notice was issued on two grounds: (i) availment and utilization of ineligible Input Tax Credit (ITC) amounting to Rs. 88,57,040/-, and (ii) availment of irregular excess ITC amounting to Rs. 1,48,84,011/- in GSTR-3B as compared to ITC available in GSTR-2A for the period in question. The total principal demand was Rs. 2,37,41,051/- with interest and penalty aggregating to Rs. 6.3 Crores.
The petitioners argued that a report was already in circulation regarding suppliers who had not filed GSTR-3B, and that the petitioners were identified as beneficiaries of one such supplier (M/s. Aster Trading Company) who failed to file GSTR-3B for FY 2019-20. The petitioners contended that the Department had already initiated separate proceedings against the defaulting supplier, and that the inadmissible credit along with interest and penalty should be recovered from the defaulting suppliers and not from the petitioners. The petitioners submitted detailed replies and supporting documents on 10.11.2025, which they claimed were not properly considered by the adjudicating authority.
The petitioners relied heavily on the Division Bench decision of the Calcutta High Court in *Suncraft Energy Pvt. Ltd. vs. Assistant Commissioner, State Tax, Ballyguange Charge* reported in (2023) 9 Centax 48 (Cal), which held that the department cannot deny ITC to a bona fide purchasing dealer merely because the selling dealer failed to deposit the tax, and that the remedy lies against the defaulting selling dealer. This judgment was challenged before the Supreme Court via Special Leave Petition, which was dismissed on 14.12.2023, thereby attaining finality.
The Court, after considering the submissions and the binding precedent in Suncraft Energy Private Limited (supra) as affirmed by the Supreme Court on 14.12.2023, held that the impugned Order in Original suffered from non-application of mind, violation of principles of natural justice, and was without jurisdiction to the extent it invoked Section 74 of the CGST Act, 2017 for the period 2018-19.
The Court issued the following directions:
1. The Order in Original dated 09.12.2025 along with the consequential recovery notice dated 12.06.2026 was quashed and set aside.
2. Respondent No. 1 was directed to revisit the issue by reconsidering the reply dated 10.11.2025 along with all documents, in light of the judgments in Suncraft Energy Private Ltd. and G.R. Infra Projects Private Ltd. (Ratlum) passed by the Supreme Court.
3. Respondent No. 1 was directed to pass a reasoned and speaking order after affording an opportunity of personal hearing within four weeks.
4. As a condition for remand and prima facie proof of bona fides, the petitioners were directed to deposit Rs. 10,00,000/- in Form GST DRC03 under protest within four weeks, failing which the benefit of the order would stand vacated and the department would be at liberty to proceed for recovery of Rs. 6.3 Crores.
5. The petitioners were directed to produce all relevant documents including tax invoices, E-Waybills, transport receipts, bank statements, GSTR-2A/2B and GSTR-3B correspondence, and proof of proceedings against defaulting suppliers.
The Writ Petition was allowed and disposed of along with CAN 1 of 2026 with the above observations and directions.
Practitioner Note
This case demonstrates the evidentiary and procedural standards applied in other matters before Calcutta High Court (Appellete Side). Understanding the court's reasoning in M/s. Cart Infralog Ltd. & Anr. vs The Additional Commissioner, HQ Anti-Evasion Unit, CGST & CX, Kolkata South Commissionerate & Ors. is valuable context for structuring arguments or assessing risk in similar proceedings.
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