The Madras High Court has restrained the GST authorities from passing adjudication orders against City Union Bank Limited on two show cause notices that challenge the bank’s availability of input tax credit (ITC) under the Goods and Services Tax (GST) regime. 

The bench ofJustice Senthilkumar Ramamoorthy has observed that the interim order comes after the bank argued that the notices were issued without jurisdiction and were based on an erroneous interpretation of Section 17 of the GST law. 

The writ petitions were filed by the bank, directed the petitioner to submit replies to the impugned show cause notices but simultaneously restrained the respondents from issuing final adjudication orders until the next date of hearing. The matter has been posted for further hearing on September 15, 2026. 

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The writ petitions arise out of two separate show cause notices issued to City Union Bank in relation to its Computer Systems Department and Digital Business Department, each having separate GST registrations. The bank challenged these notices before the High Court instead of participating in the adjudication proceedings, contending that the proceedings themselves lacked jurisdiction. 

Senior Advocate G. Shivadass, appearing for the bank, advanced multiple grounds to assail the notices.

The principal challenge relates to the GST authorities’ allegation that the same corporate entity cannot simultaneously avail input tax credit by applying both Section 17(2) and Section 17(4) of the applicable GST statutes.

According to the petitioner, this premise is fundamentally flawed and contrary to the statutory framework. The bank argued that Section 17(4), when read together with the clarification issued by the Central Board of Indirect Taxes and Customs (CBIC), permits the methodology adopted by the bank. Consequently, the very basis of the show cause notices is said to be legally unsustainable. 

Apart from disputing the interpretation of Section 17, the bank also questioned the invocation of Section 74 of the GST law, which deals with tax demands involving fraud, wilful misstatement or suppression of facts.

The petitioner submitted that the essential ingredients required for invoking Section 74 were absent in the present case, rendering the proceedings without jurisdiction. 

The bank further argued that the impugned show cause notices improperly clubbed together multiple assessment periods into a single proceeding. According to the petitioner, such consolidation is legally impermissible and constitutes an additional jurisdictional defect in the notices. 

While noting that the writ petitions challenge show cause notices rather than final adjudication orders, the High Court adopted a balanced approach.

The Court directed the petitioner to file detailed replies to both show cause notices. However, considering the jurisdictional objections raised by the bank, it restrained the GST authorities from passing any adjudication orders until the next hearing. 

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