1.1 Brief of the Case

1.2 Background of the Case

• LGW Industries claimed Input Tax Credit (ITC) on purchases from suppliers registered under GST.
• Post‑transaction, the suppliers’ GST registrations were retrospectively cancelled.
• The tax authority demanded reversal of ITC (₹1.18 crore) u/s (2)(c), alleging suppliers were fictitious,
• LGW to challenge the constitutional validity of Section 16(2)(c) and seek relief under Article 226

1.3 Key Legal Provisions Discussed

• Section 16(2)(c), CGST/WBGST Act: Denies ITC to a buyer if the supplier has not actually paid GST to the Government
• Constitutional Provisions: Article 226 (Writ Jurisdiction); Article 14 (Equality), Article 19(1)(g) (Business), Article 300A (Property); challenge to Section 16(2)(c) as unconstitutional

1.4 Petitioner’s Arguments

• Transactions were genuine, supported by invoices, GSTR‑2A, bank payments, and proper documentation.
• Suppliers were validly registered at the time of supply; LGW relied in good faith under statutory scheme.
• Retrospective cancellation shouldn't punish innocent buyers; no collusion or fraudulent intent
• Denial of ITC violates Article 14, 19(1)(g), 300A—harsh and arbitrary.
• Quoted Supreme Court and High Court precedents (Suresh Trading, Jinsasan, Indian Steel, Arise India) to argue buyers shouldn’t be penalized for supplier’s default.

1.5 Respondent’s Arguments

• Suppliers issued fake invoices, registered using forged documents.
• They carried out retrospective cancellation of suppliers’ GSTIN registration.

1. LGW failed to independently verify suppliers’ legitimacy at time of transaction, as required .

1.6 Court’s Findings & Analysis

• At purchase time, suppliers were registered and appeared valid on GSTN portal.
• LGW paid for goods and tax through bank transfers.
• There was no evidence of collusion or sham transactions between LGW and suppliers.
• Retrospective cancellation alone insufficient to deny ITC.
• Court relied on earlier Calcutta HC precedent and noted LGW’s actions upheld statutory obligations.

1.7 Court’s Judgment & Order

• Quashed the impugned ITC reversal notices.
• Remanded matter for fresh adjudication: Authorities to re-evaluate ITC claim considering:

• Validity at time of transaction
• Genuine invoices, bank payments, GSTR‑2A records
• No collusion found

• If valid, LGW is entitled to the ITC

1.8 Significance of the Judgment

• Buyers acting in good faith cannot be penalized for supplier fraud/cancellation.
• Undermines strict application of Section 16(2)(c) in absence of malafide intent.
• Affirms reliance on registration certificate and GSTR‑2A.
• Reinforces fairness and natural justice: reversal without detailed analysis is impermissible.

1.9 Conclusion

Calcutta HC in LGW Industries clarified that retrospective cancellation doesn’t automatically strip bona fide purchasers of ITC, provided they transacted with due diligence. The case demarcates innocent buyers from fraudulent suppliers under GST and protects legitimate business interests.