Quick answer: In M/s Cart Infralog Ltd. & Anr. v. The Additional Commissioner, HQ Anti-Evasion Unit, CGST & CX, Kolkata South Commissionerate & Ors., decided on 27 August 2026, Smita Das De, J. of the Calcutta High Court quashed an Order-in-Original that had confirmed a demand of Rs. 2,37,41,051 (with interest and penalty aggregating to about Rs. 6.3 crore) against a company for availing Input Tax Credit on invoices from a supplier who had stopped filing GSTR-3B returns. Applying the Division Bench’s ruling in Suncraft Energy Pvt. Ltd. v. Assistant Commissioner, State Tax, affirmed by the Supreme Court, the Court held that credit cannot be denied to a recipient under Section 16(2)(c) of the CGST Act, 2017 merely because the supplier defaulted, in the absence of any allegation of collusion. It further held that the department’s resort to Section 74’s fraud-based five-year limitation, to reach a period otherwise time-barred under Section 73’s three-year limit, was a mechanical and colourable exercise, and that the writ was maintainable despite the alternative remedy of appeal because the order violated natural justice. The petition was allowed and the matter remanded, subject to a conditional deposit of Rs. 10,00,000.
Key Takeaways
- A recipient’s Input Tax Credit cannot be denied merely because the supplier defaulted in depositing tax or filing GSTR-3B, where the recipient holds a valid tax invoice, has received the goods or services, and no collusion is alleged — following Suncraft Energy Pvt. Ltd. and Arise India Ltd., both affirmed by the Supreme Court.
- The department must first proceed against the defaulting supplier under Section 79 of the CGST Act, 2017 before looking to recover the same tax a second time from the recipient; recovering twice on the same default is not permitted.
- Invoking Section 74’s fraud, wilful misstatement or suppression language to reach a period that is time-barred under Section 73’s ordinary three-year limit is a colourable exercise of power unless the show cause notice sets out specific material particulars of how the fraud or suppression was detected.
- An adjudication order passed in undue haste, without dealing with a detailed reply and the documents annexed to it, is a non-speaking order that attracts the writ court’s jurisdiction under Whirlpool Corporation notwithstanding the statutory appeal under Section 107.
- The remedy for a defective show cause notice is not automatic vindication — the Court remanded the matter for fresh adjudication rather than deciding the credit claim on merits, and conditioned relief on a part-deposit.
1. Introduction
Few disputes recur in Goods and Services Tax litigation as often as the mismatch between a recipient’s claimed Input Tax Credit and what shows up against the supplier’s name in the department’s own systems. A buyer pays its supplier, including the tax component, holds a proper invoice, and takes credit in its returns. Months or years later, the department discovers that the supplier never deposited that tax, or never even filed the return that would have reflected it. The recipient — who had no visibility into, and often no means of policing, its supplier’s compliance — is then served with a demand to reverse the credit, sometimes with interest and penalty running into crores.
The Calcutta High Court’s order in Cart Infralog addresses this problem in the specific context of a Rs. 2.37 crore demand raised against a company that had claimed credit on invoices from a supplier, M/s Aster Trading Company, which the department itself had already proceeded against for failing to file GSTR-3B for the financial year 2019-20. Two further features made the case a useful vehicle for judicial scrutiny: the department had invoked Section 74 of the Central Goods and Services Tax Act, 2017 — the extended, fraud-based limitation provision — for a period that would otherwise have been time-barred under the ordinary three-year limit in Section 73, and it had passed its final order during the pendency of the writ petition itself, without engaging with a detailed reply the petitioner had filed a month earlier.
This article sets out the facts, works through the three issues the Court decided — the standard for denying Input Tax Credit for a supplier’s default, the standard for invoking Section 74’s extended period, and the maintainability of a writ despite an available statutory appeal — and considers what each holds for GST-registered businesses currently facing similar mismatch-based demands.
2. Case summary and background
2.1 The transaction and the demand
The petitioner, M/s Cart Infralog Ltd., received a Show Cause-cum-Demand Notice dated 11 June 2025 issued under Section 74 of the CGST Act, 2017, covering the financial years 2018-19, 2019-20 and 2023-24. The notice raised two heads of demand: ineligible Input Tax Credit of Rs. 88,57,040, and irregular excess Input Tax Credit of Rs. 1,48,84,011 claimed in GSTR-3B as compared to what appeared in GSTR-2A for the same period — the standard GSTR-2A/GSTR-3B mismatch scenario. Together with interest and penalty, the department’s claim came to approximately Rs. 6.3 crore on a principal demand of Rs. 2,37,41,051.
The department’s own case, as recorded in the order, was that a report already in circulation had identified suppliers who had not filed GSTR-3B, and that the petitioner was a beneficiary of one such supplier — M/s Aster Trading Company, which had filed returns only for January and February 2018 and defaulted thereafter for the financial year 2019-20. Separate recovery proceedings had already been initiated against Aster Trading Company itself for that default.
2.2 Procedural history
On receiving the show cause notice, the petitioner made representations to the department along with supporting documents demonstrating reversal or amendment of the credit by the suppliers concerned, and requested that any recovery of inadmissible credit, along with interest and penalty, be made from the defaulting suppliers rather than from the petitioner. The department nonetheless proceeded with the notice. The petitioner then filed the present writ petition (WPA 16556 of 2025) challenging the show cause notice. During the pendency of that petition, and without prejudice to its contentions, the petitioner filed a detailed reply on 10 November 2025 along with supporting documents — tax invoices, e-way bills, goods receipt transport receipts, proof of receipt of goods, and bank statements evidencing payment through banking channels. The adjudicating authority nonetheless proceeded to pass an Order-in-Original on 9 December 2025, confirming the demand.
2.3 Issues and holding
The Court identified three issues: first, whether Input Tax Credit could be denied to a bona fide purchaser for the supplier’s default in depositing tax, non-filing of GSTR-3B, or non-reflection in GSTR-2A; second, whether Section 74 could be invoked mechanically, by reciting the words fraud, wilful misstatement and suppression without material particulars, to circumvent the ordinary limitation under Section 73(10); and third, whether the writ was maintainable given the statutory appellate remedy under Section 107. It answered all three in the petitioner’s favour, quashed the Order-in-Original dated 9 December 2025 and the consequential recovery notice, and remanded the matter for fresh adjudication, conditioned on the petitioner depositing Rs. 10,00,000 under protest in Form GST DRC-03 within four weeks.
3. Legal analysis
3.1 Input Tax Credit cannot be denied for a supplier’s default absent collusion
The Court’s central holding rests on Section 16(2) of the CGST Act, 2017, which conditions a recipient’s entitlement to Input Tax Credit on, among other things, possession of a tax invoice or debit note issued by a registered supplier (clause (a)), receipt of the goods or services (clause (b)), and the tax charged in respect of the supply having actually been paid to the Government, either in cash or through utilisation of admissible credit (clause (c)). The show cause notice in this case did not dispute that the petitioner held valid tax invoices or that it had received the goods and services in question; its sole ground was that the fourth respondent-supplier had not shown the relevant invoices in its own GSTR-1, and had not paid the corresponding tax to the Government — a Section 16(2)(c) case, not a Section 16(2)(a) or (b) case.
For that narrower category of dispute, the Court applied the Division Bench’s ruling in Suncraft Energy Pvt. Ltd. v. Assistant Commissioner, State Tax, Ballygunge Charge, reported at (2023) 9 Centax 48 (Cal), an appeal against a special leave petition that the Supreme Court dismissed on 14 December 2023, giving the ruling the weight of a concluded matter. Suncraft Energy had itself drawn on two further authorities: the Supreme Court’s observation in Bharti Airtel Ltd. that Form GSTR-2A functions only as a facilitator for a registered person’s own self-assessment in GSTR-3B, so that a mismatch or non-operability of the auto-populated form cannot by itself defeat a credit correctly claimed on self-assessment; and the Delhi High Court’s decision in Arise India Ltd. v. Commissioner of Trade and Taxes, Delhi, which read down Section 9(2)(g) of the Delhi Value Added Tax Act, 2004 — the VAT-era analogue that denied credit where the selling dealer had not deposited the tax collected — so as to exclude a purchasing dealer who had bona fide transacted with a validly registered, invoice-issuing seller, with the Supreme Court dismissing the department’s special leave petition against that reading on 10 January 2018. Suncraft Energy had reasoned that this scheme “continues to remain the same even under the GST regime,” notwithstanding the change in statutory language and the introduction of electronic forms.
Applying that reasoning, the Court in Cart Infralog held that once the conditions in Section 16(2)(a) and (b) are satisfied — invoice and receipt of goods or services — non-reflection of a supplier’s invoices in GSTR-2A cannot by itself lead to automatic denial of credit to the recipient under Section 16(2)(c), in the absence of any allegation that the recipient colluded with the defaulting supplier. It noted, further, that the department had itself already initiated recovery proceedings against the defaulting supplier, Aster Trading Company, and held that having done so, the department could not seek to recover the same tax a second time from the recipient: the correct recourse against a defaulting supplier lies in recovery proceedings under Section 79 of the CGST Act, 2017, not in denying credit to a compliant, arm’s-length purchaser. No finding of collusion, and no invocation of the anti-collusion machinery the statute provides for such cases, had been made in the show cause notice.
3.2 Mechanical invocation of Section 74 to defeat Section 73’s limitation is a colourable exercise
The second, and arguably more consequential, holding concerns the limitation architecture of the CGST Act. Section 73 permits the department to raise a demand for tax not paid, short paid, or erroneously refunded, or for Input Tax Credit wrongly availed or utilised, for reasons other than fraud, wilful misstatement or suppression of facts, within three years from the due date for filing the annual return for the relevant year. Section 74 permits the same class of demand, but where the non-payment, short payment or wrong availment is by reason of fraud, wilful misstatement or suppression of facts to evade tax, and extends the period within which a notice may issue to five years.
The petitioner’s case, which the Court accepted, was that the period covered by the notice — financial years 2018-19 and 2019-20 — lay beyond the three-year window that Section 73(10) would have allowed, and that the department had invoked Section 74 specifically to reach that otherwise time-barred period. The Court found that the show cause notice, beyond a bare recitation of the statutory words “fraud,” “wilful misstatement” and “suppression of facts,” did not set out how any fraud was inferred or how any concealment had been detected — indeed, on the Court’s reading, the notice itself did not make clear whether the department’s own case rested on fraud or on concealment. For this proposition it relied on a decision the parties placed before it, described in the order as G.R. Infra Projects Private Ltd. (Ratlam), at its paragraphs 10 and 11, for the principle that extended limitation cannot be invoked to cover up an ordinary delay in issuing a notice within the ordinary limitation period. On that basis, the Court held that the invocation of Section 74 in this case was “without jurisdiction, de hors the statute, and a colourable exercise of power and abuse of process” — language that squarely treats the choice between Section 73 and Section 74 as a jurisdictional fact open to writ scrutiny, not merely a procedural label the department may select at will.
This holding sits within a broader and continuing line of GST litigation testing whether “fraud, wilful misstatement or suppression of facts to evade tax” — a phrase the CGST Act borrows from the erstwhile Section 11A of the Central Excise Act, 1944 and Section 73 of the Finance Act, 1994 — requires the same particularity that courts historically demanded of extended-period excise and service tax notices. The Court’s answer here — that a bare recital of the statutory formula, without stating what was suppressed, from whom, and how it was discovered, is not enough — imports that older, well-settled discipline directly into the GST context; it does not purport to be new doctrine so much as an application of it against a live and recurring departmental practice.
3.3 Writ maintainability despite the appellate remedy under Section 107
The department resisted the petition principally on the ground that the Order-in-Original dated 9 December 2025 was an appealable order under Section 107 of the CGST Act, and that the petitioner ought to be relegated to that statutory remedy — relying on an order in Fanmade11 Fantasy Sports Pvt. Ltd. v. Union of India (W.P.(C) No. 174 of 2026), in which, after a final assessment order had already been passed despite an earlier interim protection against coercive steps, the petitioner there was directed to pursue its statutory appeal with liberty to raise all contentions, including on revaluation and pre-deposit.
The Court distinguished that decision on facts and held the writ maintainable, applying Whirlpool Corporation v. Registrar of Trade Marks, reported at (1998) 8 SCC 1, for the settled proposition that the existence of an alternative remedy does not oust a writ court’s jurisdiction where the impugned order is a non-speaking order that fails to deal with the documents annexed to a reply, or otherwise violates principles of natural justice. The petitioner had contended that the order was arbitrary and illegal, having been passed “inhaste and only to save the period of limitation” under Sections 73(10)/74(10) without considering its reply and the documents annexed to it. The Court accepted the substance of that contention, holding in its own operative finding that the Order-in-Original “suffers from non-application of mind, violation of principles of natural justice” to the extent it invoked Section 74 for the 2018-19 period. That combination — a final order overtaking a pending writ petition, without engaging with a reply filed shortly before it — was treated as bringing the case within the natural-justice exception rather than the ordinary rule of exhausting statutory remedies.
3.4 What was, and was not, decided
It bears emphasis that the Court did not adjudicate the merits of the Input Tax Credit claim itself. The Order-in-Original was quashed and the matter remanded to the adjudicating authority to reconsider the reply dated 10 November 2025, together with all annexed documents, in light of Suncraft Energy and the decision on mechanical invocation of Section 74, and to pass a fresh, reasoned and speaking order after a personal hearing. The adjudicating authority was left at liberty to take an independent view, save that it must apply the binding precedents the Court identified. Relief was also made conditional: the petitioner was directed to deposit Rs. 10,00,000 under protest in Form GST DRC-03 within four weeks, failing which the benefit of the order would stand automatically vacated and the department would be free to proceed for recovery of the full Rs. 6.3 crore.
4. Practical significance
For any GST-registered business facing a demand founded on a GSTR-2A/GSTR-3B mismatch traceable to a supplier’s default, this order reinforces a compliance and litigation posture that has now been endorsed at multiple levels: maintain the full documentary trail — tax invoices, e-way bills, transport receipts, proof of physical receipt of goods, and banking-channel evidence of payment including the tax component — because it is that record, not the abstract legal proposition, that persuades a court the recipient acted bona fide. Businesses that learn a supplier has stopped filing returns should also consider proactively informing the department and seeking that recovery be directed against the supplier, as the petitioner did here; while that alone did not avert the show cause notice, it materially strengthened the argument that the department could not, having already moved against the supplier, recover the same amount twice.
The limitation holding has wider reach than this dispute. Any assessee served with a Section 74 notice for a period that has already run past the ordinary three-year window under Section 73 has a real argument — on this reasoning — that a bare recitation of “fraud, wilful misstatement or suppression” cannot, by itself, unlock the extended period; the notice must set out the specific facts said to have been concealed and how the department came to discover them. Practitioners drafting replies to such notices should test the notice itself for this deficiency at the threshold, before engaging with the substance of the demand, since a successful challenge here can dispose of an otherwise time-barred demand entirely rather than merely delaying it.
On forum choice, the order is a reminder that writ jurisdiction against an appealable GST order remains a live option only in a narrower class of case — where the order itself is non-speaking, or is passed without regard to a reply and its supporting record, or is passed in a manner suggesting haste to defeat a pending challenge. It is not, on this reasoning, a route to bypass Section 107 merely because the assessee disagrees with the outcome; the Court was careful to premise maintainability on the natural-justice defect in the specific order under challenge, and equally careful not to decide the credit dispute itself, remitting it instead to the same statutory adjudicatory process the appeal provision contemplates. Assessees should therefore treat this order as strengthening the natural-justice route only where the underlying order genuinely fails to engage with the record — not as general authority to prefer a writ over an appeal as a matter of course.
Finally, businesses and advisers should note that the conditional deposit of Rs. 10,00,000 against a principal demand of over Rs. 2.37 crore illustrates that success in a writ challenging the process does not translate into an unconditional stay of recovery; courts remitting a mismatch-based demand for fresh adjudication may still require a partial deposit as the price of interim protection, to be adjusted or refunded depending on the outcome of the remand.
5. Conclusion
Cart Infralog does not break new doctrinal ground so much as apply, with unusual clarity in a single order, three lines of authority that GST practitioners already knew but that departmental adjudication does not always respect in practice: that a recipient’s credit is not hostage to its supplier’s compliance absent collusion; that Section 74’s extended period is not a general-purpose tool for reviving a time-barred demand; and that a writ court will intervene where an adjudicating authority races to finality without engaging the record before it. Its value lies less in any single proposition than in showing how the three interact — a defective limitation basis and a non-speaking order together justified writ intervention, even though either alone might not have. Businesses carrying comparable mismatch-based notices, and their advisers, should read the order as confirmation that the burden remains on the department to particularise fraud and suppression, and to proceed against a defaulting supplier before it looks to the recipient a second time — while recognising that the credit claim here still awaits a reasoned decision on remand.
Authorities
Applied by the Court
| Authority | Citation | Proposition |
|---|---|---|
| Suncraft Energy Pvt. Ltd. v. Assistant Commissioner, State Tax, Ballygunge Charge | (2023) 9 Centax 48 (Cal), Division Bench; SLP dismissed by the Supreme Court on 14.12.2023 | Input Tax Credit cannot be denied to a bona fide recipient for a supplier’s default in depositing tax or filing returns, absent an allegation of collusion; binding on the Court. |
| Bharti Airtel Ltd. | Cited within Suncraft Energy (Supreme Court) | Form GSTR-2A is only a facilitator for a recipient’s own self-assessment in GSTR-3B; non-operability or mismatch of GSTR-2A does not by itself defeat a credit correctly self-assessed. |
| Arise India Ltd. v. Commissioner of Trade and Taxes, Delhi | MANU/DE/3361/2017 = 2018 (10) G.S.T.L. 182 (Del.); SLP dismissed by the Supreme Court on 10.01.2018, reported 2022 (60) G.S.T.L. 215 (SC) | Section 9(2)(g) of the Delhi VAT Act, 2004 read down to exclude a bona fide purchasing dealer from credit denial for a selling dealer’s default; the department’s remedy lies against the defaulting seller. |
| G.R. Infra Projects Private Ltd. (Ratlam) | As cited in the order, paragraphs 10-11 | Extended period of limitation under Section 74 cannot be invoked merely to cover up a delay in issuing notice within the ordinary limitation period; the notice must show how fraud or suppression was inferred. |
| Whirlpool Corporation v. Registrar of Trade Marks | (1998) 8 SCC 1 | Availability of an alternative statutory remedy does not oust writ jurisdiction where the impugned order violates principles of natural justice or is a non-speaking order. |
Cited by the parties, distinguished by the Court
| Authority | Citation | Context |
|---|---|---|
| Fanmade11 Fantasy Sports Pvt. Ltd. v. Union of India | W.P.(C) No. 174 of 2026 | Relied on by the respondents to argue the petitioner should be relegated to the statutory appeal under Section 107; distinguished on facts. |
Legislation considered
| Statute | Provisions | Source |
|---|---|---|
| Central Goods and Services Tax Act, 2017 | Sections 16(2)(a), (b), (c); 59; 73(10); 74; 74(10); 75(4), (6); 79; 107 | https://www.indiacode.nic.in/handle/123456789/2188 |
| West Bengal Goods and Services Tax Act, 2017 | Section 16(2) | https://www.indiacode.nic.in/ |
| Delhi Value Added Tax Act, 2004 | Section 9(2)(g) | https://www.indiacode.nic.in/ |
Judgment
M/s Cart Infralog Ltd. & Anr. v. The Additional Commissioner, HQ Anti-Evasion Unit, CGST & CX, Kolkata South Commissionerate & Ors., WPA 16556 of 2025 with IA No. CAN 1 of 2025, High Court at Calcutta, Appellate Side (Smita Das De, J.), decided 27 August 2026 — https://indiankanoon.org/doc/128760352/
FAQ
Can the GST department deny my Input Tax Credit simply because my supplier did not deposit the tax I paid them? Not without more. Following Suncraft Energy and Arise India, both affirmed by the Supreme Court, credit cannot be denied under Section 16(2)(c) of the CGST Act, 2017 to a recipient who holds a valid invoice and has received the goods or services, unless the department also shows collusion between the recipient and the defaulting supplier. The department’s remedy against the supplier is recovery under Section 79, not double recovery from the recipient.
Does invoking Section 74 instead of Section 73 always give the department five years instead of three? Only where the notice particularises fraud, wilful misstatement or suppression of facts to evade tax. A bare recitation of those words, without stating what was concealed and how it was discovered, does not convert an otherwise time-barred Section 73 demand into a valid Section 74 notice — this order treated such a recitation as a colourable exercise of power.
If my GST appeal remedy under Section 107 is available, can I still go to the High Court by way of writ? Only in limited circumstances — chiefly where the order under challenge is a non-speaking order that fails to deal with your reply and supporting documents, or otherwise breaches natural justice. This order did not hold that a writ is generally available as an alternative to the statutory appeal; it granted relief because of the specific defect in how the order was passed.
This article is not legal advice and does not create an attorney–client relationship. Readers should verify the certified copy of the judgment and any subsequent clarificatory orders before relying on it, and consult a qualified advocate on the facts of their matter.