SEZ Unit Entitled to ITC – Recovery Stayed by High Court

Case Title: Neokraft Global Pvt. Ltd. v. Union of India & Others
Court: High Court of Judicature at Allahabad
Petition Number: Writ Tax No. 1658 of 2025
Relevant Sections: Section 73, Section 74 – CGST Act, 2017
Category of Dispute: Input Tax Credit (SEZ Refund Eligibility)
Date of Judgment / Order: 17.04.2025
Relevant GST Law Sections: Section 16, 54 CGST Act; Section 26 SEZ Act, 2005; Rule 89 CGST Rules

Facts of the Case (Paras 1–3)

• The petitioner, an SEZ unit, was issued a notice under Section 73 of CGST Act alleging that being in SEZ, it was not entitled to claim ITC refund (Para 1).

• Despite a reply being filed, a second notice under Section 74 was issued on identical allegations while the first proceedings were still pending (Para 1–2).

• The petitioner argued that issuance of Section 74 notice during pendency of Section 73 proceedings is impermissible and that there was no suppression regarding SEZ status (Para 2).

• It was also submitted that three courts had already ruled in favour of SEZ units in similar disputes allowing ITC refunds (Para 3).

Question(s) in Consideration (Paras 1–3)

1. Whether a notice under Section 74 can be issued on identical allegations when proceedings under Section 73 are already pending?

2. Whether an SEZ unit is entitled to ITC refund despite being exempted from tax under GST law?

3. Whether recovery based on the disputed order dated 05.02.2025 should be stayed pending writ proceedings?

Observations of the Court (Paras 4–6, 8)

• The Court took note of the petitioner’s contention that parallel proceedings under Section 73 and Section 74 are impermissible (Para 2).

• It also observed that the claim of ITC by SEZ units had judicial support in other courts (Para 3).

• Considering the prima facie case, the Court found it appropriate to grant interim protection (Para 8).

Judgment of the Court (Para 8)

• The High Court stayed recovery proceedings pursuant to the impugned order dated 05.02.2025 until further orders.

• The matter was listed for further hearing on 22.05.2025.

Between Fine Lines

• An SEZ unit challenged denial of ITC refund.

• Two simultaneous proceedings under Sections 73 and 74 were held questionable.

• The Court noted prior rulings favoring SEZ entitlement to ITC.

• Interim relief was granted by staying recovery.

• Final adjudication is pending, but the Court signaled protection to taxpayers in SEZ refund disputes.

Summary of Referred Cases

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