Opportunity to Contest GST ITC Mismatch Granted on 25% Pre-Deposit

Case Title: Tvl. Ragul Industries v. State Tax Officer
Court: High Court of Judicature at Madras
Petition No.: W.P. No.36085 of 2024 with W.M.P. Nos.38984 & 38985 of 2024
Date of Judgment: 05.12.2024
Category of Dispute: Input Tax Credit – Mismatch & Blocked Credit
Relevant Sections: Section 16 of CGST/TNGST Act, Rule 36 CGST Rules, Circular No.183/15/2022-GST

Facts of the Case

1. The petitioner, engaged in automobile component manufacturing, challenged an assessment order dated 03.07.2024 alleging ITC irregularities for FY 2019-20 (Para 2).

2. Defects noted: (i) ineligible/excess ITC, (ii) credit note reversal, (iii) blocked credit, (iv) GSTR-3B vs GSTR-2A mismatch, (v) GSTR-3B vs GSTR-1 mismatch, (vi) Profit & Loss vs GSTR-9C mismatch (Para 2).

3. DRC-01A intimation issued on 08.02.2024, followed by DRC-01 on 27.03.2024 and multiple reminders. Petitioner filed reply on 04.06.2024 (Para 3).

4. Except three issues—blocked ITC, mismatch between GSTR-3B & 2A, and mismatch between GSTR-3B & 1—other allegations were dropped (Para 3).

5. Authority held petitioner failed to produce supplier certificate under Circular 183 and supporting evidence for remaining issues (Para 4).

Question(s) in Consideration

1. Whether petitioner should be granted one more opportunity to produce supplier certificate and documents to substantiate ITC claims under Section 16 (Para 5).

2. Whether remand is permissible subject to partial pre-deposit, following earlier Madras HC rulings (Para 6).

Observation of the Court

1. Court noted petitioner’s willingness to furnish supplier certificate under Circular 183 to prove tax payment by vendors (Para 5).

2. Reference placed on M/s. K. Balakrishnan, Balu Cables v. AC GST & CE (W.P.(MD) No.11924 of 2024, dated 10.06.2024), where remand was allowed on payment of 25% of disputed taxes (Para 6).

3. State did not object to giving a final opportunity provided petitioner deposits 25% of disputed tax (Para 7).

Judgment of the Court

1. Impugned order dated 03.07.2024 was set aside (Para 8a).

2. Petitioner directed to deposit 25% of disputed taxes within 4 weeks, after adjusting earlier recoveries (Para 8b–c).

3. Verification of payment and intimation of balance (if any) to be completed within 4 weeks (Para 8d).

4. Non-payment within time will result in restoration of assessment order (Para 8e).

5. Any bank attachment/garnishee proceedings to be withdrawn upon deposit of 25% (Para 8f).

6. On compliance, assessment order to be treated as show cause notice; petitioner may file objections with documents within 4 weeks (Para 8g).

7. Respondent to pass fresh order after granting hearing (Para 8g).

Between Fine Lines (5-Line Summary)

The Madras High Court quashed a GST demand against Ragul Industries over ITC mismatches. The Court allowed remand subject to a 25% pre-deposit of disputed tax. The petitioner was given a final chance to produce supplier certificates and documentary evidence. Failure to comply within the timeline would revive the original assessment. This ruling ensures fairness while safeguarding revenue.

Summary of Referred Cases

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