Himachal Pradesh High Court Quashes ₹16.72 Lakh GST Input Tax Credit Demand After Tax Is Paid

The Himachal Pradesh High Court has quashed a tax demand of Rs 16.72 lakh raised against Shivalik Containers Pvt. Ltd. for the alleged wrongful availment of Input Tax Credit (ITC).

The court held that the subsequent payment of tax along with interest by the supplier cannot be ignored while examining the sustainability of a demand raised against the recipient, even if such compliance takes place after a delay of more than five years.

A Division Bench of Justice Vivek Singh Thakur and Justice Jiya Lal Bhardwaj passed the order while hearing a writ petition filed by the company. The petition challenged a show cause notice and the consequential order dated 4 January 2023. The order had been issued under Section 74 of the CGST Act, 2017.

The demand was raised on the ground that the petitioner had availed ITC as the recipient of goods. The supplier, however, had failed to pay the corresponding tax at the relevant time.

The Revenue argued that the delay of more than five years in payment by the supplier made the ITC irregular. It also contended that the show cause notice was valid when issued.

The court rejected this approach. It held that the subsequent payment of tax along with interest by the supplier, M/s Shivalik Marketing, could not be ignored while examining the demand against the recipient.

The Bench noted that the department's own instructions acknowledged that the supplier had filed the pending returns and discharged the tax liability. In view of this, the Court said the petitioner's ITC claim required reconsideration in accordance with law.

The High Court set aside the GST demand. It directed the Assistant Commissioner, State Taxes and Excise, Nahan, to reopen and re-adjudicate the matter.

The writ petition was disposed of in these terms, along with all pending applications.