The Madras High Court while quashing the Input Tax Credit (ITC) reversal order held that the buyer must get a fair chance to prove 180-day supplier payments.
The bench of Justice Senthilkumar Ramamoorthy reiterated that Input Tax Credit (ITC) cannot be denied without granting the taxpayer a meaningful opportunity to establish compliance with the statutory conditions under the Goods and Services Tax (GST) law and remanded the matter to the jurisdictional GST officer for fresh adjudication after providing the company with a reasonable opportunity of hearing, including a personal hearing.
The dispute arose from an assessment order passed under Section 73 of the CGST/TNGST Act, 2017 for the financial year 2021-22. The company challenged the order before the High Court, contending that it had been denied a fair opportunity to demonstrate that reversal of ITC was unwarranted.
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The petitioner/assessee submitted that it had responded to the show cause notice dated 1 August 2025 by filing a detailed reply on 14 August 2025 along with supporting annexures. The annexures were certified by an independent Chartered Accountant and contained invoice-wise details segregating suppliers who had been paid within the statutory period of 180 days and those paid beyond that period. The company also claimed that it had attended the personal hearing.
The State, however, argued that the documents furnished by the petitioner were not readable and disputed the assertion that the taxpayer had appeared for a personal hearing.
Upon examining the record, the High Court noted that the petitioner had indeed produced a certificate issued by B K J & Company LLP, Chartered Accountants.
The certificate enclosed: Annexure-1, listing invoices for which payments had been made within 180 days from the invoice date; and Annexure-2, listing invoices where payments were made after the prescribed 180-day period.
The Court observed that these documents appeared not to have been considered because they were allegedly unreadable, resulting in the assessment being completed without examining potentially decisive evidence.
The court held that if the taxpayer succeeds in proving that payments to suppliers listed in Annexure-1 were made within the statutory period of 180 days, the company would not be liable to reverse ITC in respect of those transactions.
The Court found that, in such circumstances, reconsideration of the assessment was necessary in the interest of justice.
Accordingly, the High Court set aside the impugned assessment order and remanded the matter to the Assistant Commissioner (State Tax) for fresh adjudication.
The Court directed the tax authority to provide the petitioner with a reasonable opportunity to present its case; grant a personal hearing; and pass a fresh reasoned order within three months from receipt of the High Court’s order.
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