Non-Consideration of Sundry Creditors Ledgers: Delhi HC Sets Aside ₹80.9 Cr GST Demand, Remands Case for Reconsideration [Read Order]

The Delhi High Court has set aside a GST ( Goods and Services Tax ) demand order of ₹80.9 crore, holding that the adjudicating authority failed to consider crucial credit ledger details submitted by the taxpayer.

The petitioner, JMD Lightening & Cable Co., had approached the High Court challenging an Order-in-Original passed by the GST adjudicating authority. The impugned order imposed a tax and penalty demand aggregating to ₹80,92,84,999 on the petitioner.

The demand was primarily based on audit observations that the petitioner had availed Input Tax Credit (ITC) without making payment to suppliers within 180 days, as required under the GST provisions.

During the audit, the authorities had requested the petitioner to submit the creditors’ ledgers for FY 2017-18 onwards to verify timely payments to suppliers.

The adjudicating authority, in paragraph 18.1 of the order, recorded that despite repeated letters between April and June 2024, the petitioner had failed to provide complete ledgers, leaving the authority with “no option but to compute inadmissible ITC” based on outstanding creditor balances. Accordingly, the ITC amount was disallowed, resulting in a huge demand.

The petitioner, however, contended before the High Court that it had duly submitted the relevant documents, including the detailed list of sundry creditors for the period April 2018 to March 2023, through an email dated 22 May 2024, i.e., even before the issuance of the show cause notice on 31 July 2024. It was argued that this list was completely ignored by the adjudicating authority while finalising the order.

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The petitioner further asserted that a sum of ₹32 lakh already deposited as ITC had not been accounted for in the final computation. It was argued that the order was passed without proper appreciation of evidence, in violation of the principles of natural justice, and therefore deserved to be quashed.

Counsel for the petitioner argued that the entire computation under paragraph 18.1 of the impugned order was based on incomplete and inaccurate assumptions. The adjudicating authority had wrongly concluded that no ledgers were submitted when, in fact, the petitioner had furnished them for five financial years.

This non-consideration, the petitioner argued, led to a distorted liability figure and constituted a failure of due process.

The petitioner also emphasised that it had cooperated with the audit process and provided records through multiple communications. The department's failure to acknowledge the submission of documents could not be used to impose an arbitrary tax burden.

On the other hand, the Counsel for the Revenue argued that the writ petition was filed belatedly, as the order was passed in January 2025 and the time for appeal had already expired.

It was contended that despite several opportunities, the petitioner had not submitted complete ledgers, forcing the authority to rely on the financial statements available. The respondent maintained that the order was legally valid and based on the petitioner’s own records.

The Court, after examining the record, observed that the computation in paragraph 18.1 of the impugned order formed the very basis of the demand and penalty imposed on the petitioner.

The Court noted that the petitioner’s contention regarding the submission of credit ledgers for FY 2018-19 to FY 2022-23 appeared plausible and that these records should have been considered by the adjudicating authority before determining tax liability.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

While the Court acknowledged that the ledger for FY 2017-18 may not have been filed, the omission to consider the subsequent years’ data rendered the adjudication incomplete.

The Division Bench comprising Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta held that such non-consideration of relevant documents went to the root of the matter, particularly when the tax demand involved a significant amount.

It further noted that the petitioner’s claim of ₹32 lakh already deposited as ITC also merited verification.

Accordingly, the Court set aside the impugned order and remanded the case to the adjudicating authority for fresh adjudication. It directed the petitioner to file a comprehensive reply to the show cause notice within 30 days and instructed the authority to grant a personal hearing before passing a new order.

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