Facts of the Case:
In this case, the petitioner approached the High Court challenging a show cause notice and order issued under Section 74 of the CGST Act, 2017. By the impugned order, a demand of ₹16,72,140/- was raised against the petitioner on the ground that the supplier had not paid GST, though the petitioner had already availed Input Tax Credit (ITC) on such supplies. During the pendency of the writ petition, the State GST authorities placed instructions on record stating that on during the pendency of the writ petition, the State GST authorities placed instructions on record stating that the supplier had paid the tax along with interest, making the ITC available to the petitioner (recipient).
Despite this, the respondent argued that there was a delay of more than five years in payment of tax by the supplier, and since the impugned notice and order were issued prior to such payment, the action was justified. Further, the adjudicating authority allegedly lacked jurisdiction to revisit the matter unless directed by the Court.
Issue:
Whether an order passed under Section 74 of the CGST Act denying ITC to the recipient on account of supplier’s non-payment of tax can be sustained when, subsequently, the supplier has filed returns and paid the tax along with interest, thereby making ITC available to the recipient.
Held that:
The Court took note of the categorical instructions placed on record by the respondent which confirmed that the supplier, M/s Shivalik Marketing, had filed the pending GST returns for the period February 2020 to March 2020, and the tax along with applicable interest had been duly paid, and Consequently, the Input Tax Credit (ITC stood restored and became available to the recipient, i.e., the petitioner.
As a result, the very foundation of the demand raised against the petitioner under Section 74 namely, non-payment of tax by the supplier no longer survived. Once tax and interest were paid by the supplier, denial of ITC to the recipient could not be sustained without fresh examination.
The Court rejected the contention of the revenue that the authority lacked power to re-adjudicate the matter unless directed by the Court. It held that since new and material facts had emerged after passing of the impugned order, the adjudicating authority was required to re-open and re-examine the issue of ITC eligibility in accordance with law.
The High Court allowed the writ petition and granted substantive relief to the petitioner by setting aside the impugned order passed under Section 74 of the CGST Act, 2017. The Court directed the respondent to Re-open the proceedings, Re-open the proceedings, Either determine any subsisting liability of the petitioner, if sustainable in law, or Accept the petitioner’s claim of ITC as admissible, in accordance with the CGST Act and Rules.
The Court reinforces that once the supplier has discharged tax liability with interest, denial of ITC to the recipient cannot mechanically continue, and the matter must be reconsidered afresh by the adjudicating authority in light of the updated factual and legal position.
Case name: M/s Shivalik Containers Pvt. Ltd. Versus The Assistant Commissioner & Another. dated 24.12.2025
To read the complete judgement 2025 Taxo.online 3452
