Facts of the Case:

In this case, the dispute arose from a Show Cause Notice dated 03.01.2024 issued under Section 73 of the CGST Act for the Financial Year 2018–19, alleging excess availment of Input Tax Credit (ITC) in GSTR-3B as compared to GSTR-2A. The adjudicating authority confirmed the demand of ₹41,41,731/- along with interest and penalties. The appellate authority partly allowed the appeal but largely upheld the demand. During the writ proceedings, the petitioner contended that the disputed ITC had already been reversed and correctly claimed under the appropriate head prior to issuance of the SCN. Initially, this claim was rejected for lack of evidence; however, during the hearing before the High Court, the respondent authority confirmed the correctness of the petitioner’s submission.

Issue:

Whether the demand of excess ITC and consequential orders could be sustained when the petitioner had already reversed and correctly re-availed the ITC prior to issuance of the Show Cause Notice.

Held That:

The High Court noted that the core allegation in the Show Cause Notice under Section 73 of the CGST Act was excess availment of Input Tax Credit (ITC) based on mismatch between GSTR-3B and GSTR-2A. However, during the course of proceedings before the Court, it was specifically brought to notice that the petitioner had already reversed the disputed ITC and re-availed it under the correct head prior to issuance of the SCN.

Importantly, the Court recorded that although this contention had been raised before the appellate authority, it was rejected for want of documentary evidence. However, during the writ proceedings, the respondent authorities themselves verified and candidly confirmed the correctness of the petitioner’s claim. In view of this admission, the very foundation of the demand raised in the SCN and confirmed in the adjudication and appellate orders stood materially undermined.

On this basis, the Court concluded that continuation of the impugned orders would be unjustified and contrary to the factual position now accepted by the department. Accordingly, the Court exercised its writ jurisdiction to quash and set aside both the Order-in-Original and the Order-in-Appeal.

The judgment underscores that substantive compliance by the taxpayer such as prior reversal and correct re-availment of ITC must be duly considered before confirming demands under Section 73. It highlights the importance of proper verification by authorities and reinforces that demands cannot be sustained where factual errors are acknowledged by the department itself.

Case Name: M/s. Harsh Khanna And Sons Huf Versus Union of India Through Its Secretary, Government of India, Ministry of Finance, Department of Revenue, New Delhi, Assistant Commissioner Laxmi Nagar Division Central Goods And Services Tax Delhi East Commissionerate, New Delhi. dated 25.03.2026

To read the complete judgement 2026 Taxo.online 737