GST ITC Cannot be Denied to Recipient Once Supplier Pays Tax with Interest: Himachal Pradesh HC Orders Re-adjudication [Read Order]

The Himachal Pradesh High Court has ruled that Input Tax Credit ( ITC ) under Goods and Services Tax ( GST ) cannot be denied to a recipient merely because the supplier initially failed to pay tax, once it is established that the supplier has later discharged the liability with applicable interest.

In the present case, a S. 74 order was issued by the GST department to the petitioner, M/s Shivalik Containers Pvt. Ltd. The petitioner, through Mr. Vishal Mohan, Senior Advocate filed a petition before the high court challenging the notice.

The petitioner sought to quash the order dated 04.01.2023 stating that the same is illegal and unsustainable. Through the order, the department demanded ₹16,72,140/- for non-payment of tax by the supplier for which ITC has been claimed by the petitioner.

The Additional Advocate General has submitted the instruction that based on GST portal records, that the supplier had filed the pending returns for February - March 2020 and paid the tax along with interest, making the ITC available to the recipient/buyer/petitioner.

The petitioner’s counsel submitted that the petitioner shall be allowed based on the instruction provided by the state’s advocate.

Also read: Creditworthiness ofCreditor cannot be Denied merely due to Non-Filing of ITR: Patna HC deletesAddition u/s 68 [Read Order]

However, the Additional Advocate General, Mr. Sushant Keprate also stated that the supplier has been delaying the tax deposit for more than five years, and as a result, the petitioner was properly informed before the supplier deposits the tax.

Additionally, the concerned authority does not have the authority or jurisdiction to re-adjudicate the claim of the ITC, which is available to the recipient, the petitioner, for the deposit of tax along with interest by the supplier, unless directed by the Court.

While the department argued that the supplier had paid tax after a delay of more than five years and that the notice was valid when issued, the Court observed that appropriate directions were required once tax with interest was paid.

Therefore Justice Vivek Singh Thakur set aside the impugned S. 74 order and the Assistant Commissioner was directed to reopen and re-adjudicate the matter, either by accepting the ITC claim or determining liability strictly as per the GST Act within 31st January 2026.

As per exact words of the court “Respondent No. 1-Assistant Commissioner, State Taxes and Excise, Nahan, District Sirmour, H.P. is directed to re-open the issue and re-adjudicate the matter in reference in accordance with law and determine the liability, if any, of the petitioner or accept its claim as admissible under law. Needful be done on or before 31st January, 2026.”

The matter was disposed of accordingly.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates