The petitioners challenged a show cause notice under Section 74 alleging wrongful availment of ITC on the basis that suppliers were non-existent or subsequently deregistered. The factual background showed that all statutory conditions under Section 16 were fulfilled and no proceedings were initiated against suppliers.
The Court held that ITC cannot be denied to the recipient without first initiating action against defaulting suppliers, unless exceptional circumstances exist. The impugned show cause notice was set aside.