Prima Facie Duplication in GST ITC Demands: Delhi HC Flags Dual Recovery of Reversed and Utilised ITC, Allows Appeal with Limited Pre-Deposit [Read Order]

The Delhi High Court observed that there is a duplication in the demand under Goods and Services Tax ( GST ) Input Tax Credit ( ITC ) on the sweet shop-cum-restaurant. It has directed to approach the appellate forum in limited pre-deposit.

Justices Prathiba M. Singh and Rajneesh Kumar Gupta observed that “On a prima facie view, it appears that there would be duplication of two demands as demand qua reversal of availed ITC and demand qua utilisation of ITC would be one and the same thing. But both have been separately demanded in the impugned order.”

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The petitioner, M/s Lala Shivnath Rai Sumerchand Confectioner Pvt. Ltd., challenged a show cause notice dated 5th August 2025 and an Order-in-Original dated 5th February 2025, which raised demands for the financial years 2017-18 to 2022-23.

The demands pertained to the alleged ineligibility and erroneous utilization of ITC by the petitioner in respect of its operations, which include both a restaurant and a sweetmeat shop.

The primary contention revolved around the applicability of ITC in the restaurant segment, where GST is levied at a concessional rate of 5% without ITC benefit, contrasted with the sweetmeat shop segment where higher GST rates apply and ITC is admissible.

The petitioner argued that the impugned order resulted in a double demand: first, by denying the ITC availed and, second, by treating the very same ITC as wrongly utilized for discharging tax liabilities.

This, according to the petitioner, amounted to an impermissible duplication, effectively seeking recovery of the same amount twice over.

The High Court, taking a prima facie view, concurred with the argument, observing that the reversal and utilization of the same ITC cannot logically form two separate bases for tax recovery.: 30th May, 2025

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The court recognized that the Order-in-Original is appealable, but they believed the dual demand issue was sufficiently important to merit a protective remedy.

Accordingly, the it directed that the petitioner may approach the appellate authority by 15th July 2025, and that the mandatory pre-deposit requirement would be limited only to specific components of the demand namely, those arising from short payment, additional ITC claimed in GSTR-3B over GSTR-2A, and the demand discussed under para (iii) of the order.

The Court further directed that any deposits already made by the petitioner would be adjusted toward the pre-deposit requirement and instructed the appellate authority to consider the appeal on merits without dismissing it as time-barred.