May the Department disallow ITC on the Goods Purchased from Such Person whose registration was subsequently cancelled???

 Ms. Vidya Drolia vs. The Union of India

This particular case was based on the theory of ‘vested right’ in ITC. 

The appellant, M/s Vidya Drolia, is eligible for an input tax credit in respect of GST paid on purchases from a registered dealer under the CGST Act. However, the supplier in this case had earlier registered the name, and the registration was later nullified. 

The tax authorities refused the ITC based on the registration, which was cancelled earlier. The aggrieved Party move to the Court and Supreme Court has given a landmark judgement on that issue: 

The Supreme Court entertained the concern of the taxpayer and affirmed the existence of a ‘vested right’ to ITC. The court also found that the credit for GST paid on purchases cannot be denied to a supplier who has cancelled his registration. This judgment provides commercial entities with the necessary protection against being punished for situations that are out of their control.