ITC Denied Without Reasoning for One Supplier: Calcutta HC Stays GST Demand Until December 2025 [Read Order]

In a recent case, the Calcutta High Court stayed a GST demand issued against a taxpayer after input tax credit (ITC) was denied for one supplier without any reasoning. The court found the denial arbitrary and also questioned whether the demand was issued within the time limit set by law.

Amar Nath Jaiswal, the petitioner, challenged an order dated 28 August 2024 passed under Section 73 of the West Bengal/Central Goods and Services Tax Act, 2017, for the financial year 2019–20. The Petitioner’s counsel argued that the order was passed beyond the statutory time limit under Section 73(10) of the GST Act. They referred to earlier government notifications that extended the deadline for filing annual returns only up to 31 March 2021.

The petitioner’s counsel further argued that later extensions issued through notifications dated 31 March 2023 and 28 December 2023 under Section 168A of the Act were invalid, as there was no force majeure situation to justify them.

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The petitioner’s counsel also argued that the ITC denial related to purchases from three suppliers, whose GST registrations were later cancelled retrospectively. They submitted that all purchases were made during the normal course of business and in good faith. In support of this, he produced invoices, e-way bills, and ledger entries.

They pointed out that the tax officer accepted his explanation for two suppliers but rejected it for the third: Shree Shyam Iron and Steel Trading Company, without giving any reason. The petitioner’s counsel argued that this lack of explanation made the order arbitrary and showed a failure to exercise jurisdiction.

The State’s counsel asked for time to respond and said they would seek instructions regarding why the tax officer rejected ITC for one supplier but accepted it for the others.

A single bench led by Justice Raja Basu Chowdhury found that the petitioner had raised serious concerns, both about the limitation period and the lack of justification in the ITC denial. The court directed that the impugned GST demand be stayed until December 2025 or until further orders. The court also allowed the State six weeks to file an affidavit in opposition, and permitted the petitioner to file a reply within four weeks thereafter.

The case remains pending, but the High Court’s interim order provides relief to the petitioner and puts the demand on hold, at least temporarily.

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