Facts of the Case

The petitioner, M/s. Savitri Industries, challenged an order dated 25.02.2025 in Form GST DRC-07 passed under Section 74 of the GST Act raising a demand of Rs.13,63,646/- (tax Rs.4,82,531/-, interest Rs.3,98,584/- and penalty Rs.4,82,531/-) for April 2019 to March 2020. A notice under ASMT-10 had earlier flagged a discrepancy in ITC of Rs.4,82,531/- claimed on IGST transactions with M/s. KVR Industries Limited; a Section 73 proceeding was dropped once a Section 74 proceeding was initiated, and after the petitioner's participation, the impugned demand followed under Section 74, disallowing ITC under Section 16(2)(c) on the ground that the supplier had not discharged its GSTR-3B liability.

Issues Involved

  1. Whether ITC could be disallowed to a recipient under Section 16(2)(c) solely because the supplier had not filed GSTR-3B, despite the recipient possessing GSTR-2A entries.
  2. Whether the writ petition, filed beyond the period (including the condonable period) prescribed under Section 107, could be entertained.
  3. Whether disputed factual questions on ITC eligibility should be examined by the writ court or left to the statutory appellate authority.

Petitioner's Arguments

  • The entire demand rested on disallowance of ITC merely because the supplier, M/s. KVR Industries Limited, had not discharged its tax liability by filing GSTR-3B for the relevant months, even though the ITC was reflected in the petitioner's self-assessment return in Form GSTR-2A.
  • Saddling the recipient with the supplier's default amounted to double taxation, which is impermissible in law.

Respondent's Arguments

  • The assessing officer's order under Section 74 was reasoned, passed after affording opportunity of hearing and examining purchase registers, waybills, payment details, goods-transport details and the ITC register against proof of the supplier's deposit with the exchequer.
  • The writ petition, filed on 13.06.2025 against an order dated 25.02.2025, was beyond both the three-month period under Section 107(1) and the further one-month condonable period under Section 107(4), and there was no pleading explaining the delay; the appropriate remedy lay in appeal, and the writ was liable to be dismissed as premature or in limine, relying on Orissa Mineral Development Company Ltd. v. Commissioner of Sales Tax, Orissa.

Court Order / Findings

  • The Court noted that the writ petition was filed well beyond the outer limit under Section 107(4) with no pleading explaining the delay, and, following its own ruling in Bikash Panigrahi v. The Commissioner, Commercial Tax (W.P.(C) No.12755 of 2025), declined to exercise discretion to entertain a writ filed beyond the condonable appellate period.
  • The Court further held that whether disallowance of ITC for the supplier's non-filing of GSTR-3B was in conformity with statutory requirements involved disputed questions of fact that the appellate authority, empowered to reappreciate evidence under Section 74, was better placed to examine, relying on its own decision in Transtech Solution v. The Commissioner of CT & GST and the Supreme Court's ruling in Assistant Commissioner of State Tax v. Commercial Steel Limited.
  • The writ petition was accordingly dismissed with liberty to avail the alternative statutory remedy under the GST Act, expressly clarifying that the facts discussed were not an expression of opinion on the merits, with no order as to costs.

Important Clarification

  • Where GST ITC is disallowed under Section 16(2)(c) on the footing that the supplier failed to discharge its output tax liability, whether the recipient genuinely satisfied the statutory conditions for availing that credit is treated as a disputed question of fact more appropriately resolved by the Section 107 appellate authority than by a writ court, particularly where the assessing officer has examined purchase registers, waybills and payment proof.
  • A writ petition filed after the expiry of both the ordinary three-month and condonable one-month periods under Section 107, without pleaded reasons for the delay, will ordinarily not be entertained by the High Court merely because the law of limitation does not strictly bind writ jurisdiction.

Sections Involved

  • Section 74 of the Goods and Services Tax Act, 2017 — determination of tax not paid, short paid or ITC wrongly availed by reason of fraud, wilful misstatement or suppression.
  • Section 16(2)(c) of the GST Act, 2017 — condition for availing ITC requiring that tax charged has actually been paid to the Government.
  • Section 107 of the GST Act, 2017 — appeal to the Appellate Authority, including the condonable delay window under sub-section (4).

Decision – In Favour of

Dismissed, in favour of the Department to the extent the writ was held not maintainable, with liberty to the Assessee to pursue the statutory appellate remedy on the merits.

Case Details

Court: Orissa High Court, Cuttack
Case No.: W.P.(C) No.17292 of 2025
Coram: The Hon'ble the Chief Justice Harish Tandon and Hon'ble Mr. Justice Murahari Sri Raman
Date of Order: 28th July, 2025

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