Why HC allowed Sanchita ITC on his purchases from fake, bogus but registered tax payers?

He was totally innocent, honestly carrying his business, buying goods from suppliers in cheque after paying full GST.

He was highly unaware that his this supplier is fake, bogus GST registrant. He bought goods from him, paid the goods' price in cheque, received proper GST invoice. In fact, while filing his GST return he saw the supplier's tax paid invoice available for ITC credit in form GSTR-2A and happily availed the credit.

But one unfortunate day Sanchita received GST order asking him to pay

the GST, the penalty and interest because GST department disallowed his ITC claim as they cancelled registration of his suppliers with retrospective effect covering the transaction period in question.

What??? Everything was fine and dandy even on the day I filed my return after claiming ITC!!! And why should I be penalised for my no fault? thought Sanchita.

You know, courts also think and ordered the same....

Honorable HC ordered -

"If it is found upon verification and considering the relevant documents that all the purchases and transactions in question are genuine and supported by valid documents and transactions in question were made before the cancellation of registration of those suppliers and after taking into consideration as to whether facts of the petitioners are similar to the judgements of the Supreme Court and various High Courts and of this Court upon which petitioners intend to rely and if it is found similar to the present case in that event the petitioners shall be given the benefit of input tax credit in question."

In short, department will allow ITC on validly supported genuine transactions carried out before the registrant's cancellation date.