The Madras High Court has granted interim relief to a taxpayer challenging a GST assessment order that demanded reversal of Input Tax Credit (ITC) on the ground that payments to suppliers were not made within 180 days of the respective invoices.
The bench of Justice Senthilkumar Ramamoorthy observed, at the prima facie stage, that the tax demand appeared to have been wrongly confirmed under Section 74 of the GST law and stayed recovery on the disputed issue until the next hearing.
The petitioner challenged an assessment order dated March 30, 2026. The challenge was confined to that part of the assessment which alleged wrongful availment of ITC due to the company’s failure to make payment to suppliers within the statutory period of 180 days from the date of the respective invoices.
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The petitioner argued that Explanation (2) to Section 74 of the GST Act makes it clear that taxpayers are not required to disclose details relating to non-payment to suppliers within 180 days in their GSTR-3B returns. It was further contended that the essential ingredients required for invoking proceedings under Section 74—which deals with cases involving fraud, wilful misstatement, or suppression of facts—were not satisfied in the present case.
The High Court noted that interim protection had already been granted in several matters involving consolidated assessments across multiple tax periods. The Court also recorded its prima facie view that the disputed GST demand had been wrongly confirmed under Section 74 of the applicable GST enactments.
The Court ordered an interim stay of the impugned assessment order insofar as it related to the alleged wrongful availment of ITC on account of non-payment to suppliers within 180 days. The stay will remain in force until the next date of hearing.
The High Court has directed that the matter be listed for further hearing on August 18, 2026, when the legality of invoking Section 74 for such ITC-related disputes will be examined in greater detail.
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