GST ITC Dispute Over Supplier’s Non-Payment of GST Amid Liquidation: Madras HC Orders 10% Pre-Deposit for Statutory Appeal [Read Order]

The Madras High Court has directed the taxpayer to avail the appellate remedy provided under the law against the GST ( Goods and Services Tax ) demand notice in a case involving the denial of Input Tax Credit (ITC) on the grounds that GST was not being paid by the supplier.

It has allowed the taxpayer to file an appeal before the Appellate Authority subject to the pre-deposit of 10% of the tax amount.

The petitioner, SKS Builders and Promoters had challenged an order passed by the Assistant Commissioner of State Tax, confirming certain demands proposed in a show cause notice issued in Form DRC–01. The demand was partly confirmed even after the reply was submitted by the petitioner in Form DRC–06

In the present case, the impugned order has assessed the tax amount of ₹2,49,300 along with an amount of interest of ₹1,81,464 and penalty of ₹24,930, aggregating to a total amount of ₹4,55,694 under the CGST/SGST Acts.

The present dispute has arisen as the petitioner’s claim of ITC on the transactions reflected in GSTR-2A based on invoices issued by the supplier was contested by the department.

The supplier which had issued the invoices based on which the petitioner raised the ITC claim subsequently entered into liquidation proceedings which resulted in the non payment of the tax liability.

This led to the department disallowing the ITC claim made by the petitioner on the ground that the tax had not been deposited to the Government as the supplier had failed to deposit the tax collected on the invoices to the Government.

However, the petitioner had contended that it had genuinely purchased the goods and had paid for the same including the GST component and hence could not be denied the ITC claim on the ground that the supplier had failed to deposit the tax to the Government.

The petitioner claimed that the ITC has been availed based on valid tax invoices issued by the supplier and that the payment has been made for the supplies received. It has been claimed that the supplier company is in liquidation and has failed to pay the corresponding GST liability.

The petitioner has also claimed that the liquidation of the company has been approved by the National Company Law Tribunal (NCLT), and the complaint has been filed against the liquidator at the appropriate forum.

The Bench consists of Justice C. Saravanan had observed that the writ petition was filed within the limitation period for filing a statutory appeal under the GST Act. The Court held that in view of the availability of an effective appellate remedy, it was not inclined to go into the merits of the dispute.

The Court was of the view that the petitioner was at liberty to file an appeal before the Appellate Authority within a period of 30 days, subject to compliance with the statutory requirement of depositing 10 percent of the disputed tax.

The Court also directed that in case of a favorable order being passed by the NCLT it could be considered by the appellate authority.

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