Facts of the Case

M/s Shivalik Containers Pvt. Ltd. challenged a show cause notice and order dated 04.01.2023 issued under Section 74 of the CGST Act, 2017, raising a demand of Rs.16,72,140/- for non-payment of tax by its supplier, M/s Shivalik Marketing, on which the petitioner had claimed input tax credit. During the pendency of the petition, the State's Additional Advocate General placed on record instructions confirming that the supplier had, in the meantime, filed its due returns for February-March 2020 along with interest, making the ITC available to the petitioner as recipient.

Issues Involved

  1. Whether ITC denied on the ground of the supplier's default becomes available once the supplier deposits the tax with interest, even after a delay.
  2. Whether the adjudicating authority retains jurisdiction to re-examine the ITC claim once the supplier's compliance is verified.

Petitioner's Arguments

  • In view of the Department's own instructions confirming the supplier's belated deposit of tax along with interest, the petition deserved to be allowed and the impugned order dated 04.01.2023 set aside.

Respondent's Arguments

  • There was a delay of more than five years in deposit of tax by the supplier, so the notice to the petitioner was rightly issued prior to that deposit.
  • Absent a specific court direction, the concerned authority had no jurisdiction or power on its own to re-adjudicate the ITC claim once the supplier's tax, along with interest, had since been deposited.

Court Order / Findings

  • Noting the Department's own instructions that after deposit of tax with interest by the supplier, ITC becomes available to the recipient for the claim of the same, the Court found appropriate directions were required for re-adjudication.
  • The Court set aside the impugned order dated 04.01.2023 and directed the Assistant Commissioner to re-open the issue and re-adjudicate the matter, determining the petitioner's liability afresh or accepting its ITC claim as admissible under law, with a fixed compliance timeline.
  • The petition was disposed of accordingly along with any pending applications.

Important Clarification

  • Where a supplier eventually deposits GST along with interest, even after a substantial delay, the recipient's input tax credit claim on that supply is not permanently foreclosed and must be re-examined by the adjudicating authority.
  • Departmental instructions filed in court conceding the taxpayer's factual position can themselves form the basis for setting aside a Section 74 demand and directing re-adjudication.

Sections Involved

  • Section 74, CGST Act, 2017 – demand and recovery for tax not paid or ITC wrongly availed by reason of fraud, wilful misstatement or suppression.
  • Input Tax Credit provisions, CGST Act, 2017 – govern eligibility of ITC where the supplier's tax compliance is in question.

Decision – In Favour of

Decided in favour of the assessee. The demand order was set aside and the matter remanded for re-adjudication in light of the supplier's subsequent tax deposit.

Case Details

Court: High Court of Himachal Pradesh, Shimla
Case No.: CWP No. 20174 of 2025
Coram: Hon'ble Mr. Justice Vivek Singh Thakur and Hon'ble Mr. Justice Jiya Lal Bhardwaj
Date of Order: 24.12.2025

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