Case Details
Case Title: TVL. Sri Balaji Trading Company v. The Assistant Commissioner (ST) (FAC)
Court: Madras High Court
Petition No.: W.P. No. 21448 of 2025 with WMP Nos. 24224 & 24225 of 2025
Date of Judgement: 18.06.2025
Category of Dispute: Input Tax Credit (ITC) denial based on alleged fictitious supplier
Relevant Sections: Sections 16 & 74 of the CGST Act, 2017; Rule 86A of the CGST Rules, 2017
Facts of the Case (Para 3, 3.1)
The petitioner, a wholesale and retail trader of FMCG goods, had regularly filed GST returns and availed ITC on purchases from Hindustan Unilever Limited (HUL). The respondent issued a show cause notice on 15.06.2024 alleging that HUL was a non-existent supplier and blocked ITC worth ₹1,57,860/- each under CGST and SGST. Despite the petitioner’s reply dated 23.07.2024, which included invoices and proof of transactions, the department passed an order dated 04.04.2025 confirming tax, interest, and penalty without considering the reply.
Questions Raised
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Whether ITC can be denied merely on the allegation that a supplier like Hindustan Unilever Ltd. is fictitious?
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Whether the impugned order was passed in violation of natural justice by ignoring the reply and evidence submitted by the petitioner?
Court’s Observations (Paras 4–5)
The Court noted that the allegation branding Hindustan Unilever Ltd. as a “non-existent company” was a glaring error and revealed non-application of mind by the department. Such a conclusion, without substantive evidence, is legally untenable. The Court emphasized that due process under GST requires proper consideration of replies, documents, and opportunity of hearing before confirming demands.
Judgement (Paras 5 & 8)
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The impugned order dated 04.04.2025 was set aside.
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The matter was remanded back to the department for fresh consideration.
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The petitioner was directed to file additional reply with documents within two weeks.
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The respondent was directed to provide 7 days’ notice and personal hearing before passing fresh orders.
The writ petition was disposed of with no costs.
Cases Referred & Verdicts (Summary Table)
| Case | Verdict |
|---|---|
| Present Case (Sri Balaji Trading Co.) | ITC demand set aside as supplier (HUL) cannot be treated as fictitious without evidence; remanded for fresh hearing. |
Between Fine Lines (Practical Takeaway)
Tax authorities cannot whimsically treat reputed suppliers like Hindustan Unilever Ltd. as fictitious and deny ITC. Any such action without evidence reflects lack of application of mind and violates natural justice. Businesses should preserve invoices and returns as proof, while tax officers must provide fair hearing before passing orders.
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