ITC Denied due to Supplier's Non-Filing of GST Returns and Non-Payment of Taxes: Madras HC directs to Avail Statutory Remedy [Read Order]

The Madras High Court, in a matter where ITC ( Input tax credit ) was denied due to the supplier’s non filing of GST ( Goods and Services Tax ) Returns and non-payment of taxes, has directed to avail statutory remedy.

Vijay Impex, the assessee challenged the ITC reversal order, asserting they legitimately availed themselves of the ITC based on supplies from M/s. Panjali Colours. Following a show cause notice issued on 14.11.2023, the petitioner responded with submissions on 21.12.2023 and 31.01.2024. Despite these submissions, the contested order was issued on 22.04.2024.

The counsel of Vijay Impex asserted that all necessary documents regarding the purchases from M/s. Panjali Colours were provided.

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GST ITC Draft Replies & Internal Controls [New Edition – 2nd Edn 2024] Click here

Citing Circular No.183 dated 27.12.2022, the counsel stated that the taxpayer can submit a supplier’s certificate to support the ITC claim if the difference between the ITC claimed in Form GSTR-3B and that in Form GSTR-2A is less than ₹5,00,000.

Additionally, the counsel placed reliance on a previous Division Bench order, submitting that the order is unsustainable.

Responding to these contentions, Mr. C. Harsha Raj, the Additional Government Pleader, pointed out that the ITC was denied because the supplier failed to comply with the filing and tax payment requirements.

GST ITC Draft Replies & Internal Controls [New Edition – 2nd Edn 2024] Click here

The bench of Justice Senthilkumar Rammaoorthy reviewed the order dated 22.04.2024 and it was clear that the petitioner’s responses and accompanying documents, including the supplier’s certificate, were considered. Thus, the court noted that there was no breach of natural justice principles from the part of the GST department.

The bench further added that the contested order detailed the grounds for rejecting the supplier’s certificate provided by the assessee, indicating that this matter did not warrant the exercise of the court's discretionary jurisdiction. While disposing the petition, the high court noted that the assessee still has the opportunity to pursue the statutory remedy within the prescribed limitation period and thus directed to avail the same.

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