GST ITC Blocked over Suspected Fake Invoices: Madras HC directs dept to Resolve Issue within 5 Weeks [Read Order]

The Madras High Court directed the GST (Goods and Services Tax) Department to resolve within five weeks the issue of blocked Input Tax Credit (ITC) of a taxpayer accused of dealing with fake invoices.

The bench of Justice Krishnan Ramasamy was hearing writ petitions filed by M/s Aarupadai and Co., a registered taxpayer under the GST Act, challenging the issuance of Show Cause Notices dated 18.02.2025 under Rule 100(2) and Rule 142(1)(a) of the CGST Rules.

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The petitioner claimed that their ITC had been negatively blocked based on allegations of inward supplies from non-existent suppliers issuing fake invoices during the financial year 2023-2024.

According to the petitioner, all transactions were genuine and duly reflected in their GSTR-1 returns. The blocking of ITC had paralyzed the petitioner’s business operations, prompting them to approach the Court for urgent relief. It was also submitted that the petitioner had already filed a reply along with supporting documents in response to the notices.

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During the hearing, the government counsel submitted that the department was willing to consider the petitioner’s reply and pass a reasoned order after granting a personal hearing.

Acknowledging that adjudication of factual disputes like whether invoices are forged cannot be done in writ jurisdiction, the Court refused to quash the show cause notices but expressed the requirement of expeditious disposal.

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The Bench directed the department to provide a seven-day clear notice fixing a date for personal hearing and to consider the petitioner’s documentary evidence. If it is found that the transactions were not based on fake invoices, the authorities have been instructed to consider unblocking the petitioner’s ITC. The entire process must be concluded within five weeks from the receipt of the court’s order.

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