The Madras High Court has declined to interfere with an assessment order denying input tax credit (ITC) on purchases where the supplier had not filed GSTR-3B returns or paid the corresponding tax and clarified that the buyer would be entitled to the credit if the supplier subsequently pays the tax.

The bench of Justice Senthilkumar Ramamoorthy while relying on the Supreme Court judgment in Bhandari Scrap Traders v. Union of India (2026), the High Court held that Input Tax Credit (ITC) cannot be claimed by a recipient if the supplier fails to deposit the tax with the government—even if the buyer acted in good faith.

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The company told the Court that it had purchased goods from Kamachi Industries Limited in 2020 and had paid tax as part of the purchase. Appearing in person for the company, its executive director, Anil Kumar Ojha, said the supplier later entered the corporate insolvency resolution process.

He argued that the show cause notice came three years after the purchase. By then, the company was in no position to follow up with the supplier and ensure that it paid the tax to the government. Denying ITC despite the buyer’s payment, he submitted, was unjust because the buyer was not at fault.

The State’s counsel relied on the Supreme Court’s decision in Bhandari Scrap Traders v. Union of India, submitting that a recipient cannot claim ITC when the supplier has failed to pay the tax.

The High Court examined the challenged assessment order and noted its finding that Kamachi Industries had not filed GSTR-3B returns and, consequently, had not paid the tax. The buyer did not dispute that the tax remained unpaid when the assessment order was issued or that it had remained unpaid afterward.

The Court also noted that the assessment order was issued in 2023, while the company approached the High Court only in September 2026.

In light of the supplier’s continuing non-payment and the Supreme Court decision cited by the State, the High Court found no ground to interfere with the assessment order. It dismissed the writ petition without an order as to costs.

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