Facts of the Case

The Petitioner, M/s Lala Shivnath Rai Sumerchand Confectioner Pvt. Ltd., operates a sweetmeat shop along with a small restaurant facility. The dispute arose from a Show Cause Notice dated 05.08.2025 and an Order-in-Original dated 05.02.2025, wherein substantial tax demands were raised for the financial years 2017–18 to 2022–23.

The authorities alleged wrongful availment and utilization of Input Tax Credit (ITC), primarily on the ground that restaurants taxed at 5% GST are not eligible to claim ITC, whereas the Petitioner claimed entitlement based on its sweetmeat business.

The impugned order raised multiple demands including:

  • Ineligible ITC recovery exceeding ₹11 crores
  • Additional ITC demand of ₹14+ crores
  • Short payment of tax
  • Interest under Section 50
  • Penalty under Section 74 

Issues Involved

  1. Whether a business operating both restaurant and sweetmeat shop can claim ITC for its composite operations.
  2. Whether denial of ITC and demand on its utilization simultaneously amounts to duplication of demand.
  3. Whether the writ petition is maintainable when statutory appellate remedy is available. 

Petitioner’s Arguments

  • The Petitioner argued that sweetmeat business is eligible for ITC, and hence the denial is unjustified.
  • It was contended that the impugned order raises double demand:
    • First, by disallowing ITC
    • Second, by treating its utilization as wrongful
  • This effectively results in recovery of the same amount twice, which is legally impermissible. 

Respondent’s Arguments

  • The Respondent submitted that the impugned order is appealable, and therefore, the Petitioner should avail the statutory remedy.
  • It maintained that the demand was raised under Section 74 of the CGST Act, 2017 for wrongful ITC availment and utilization.

Court’s Findings / Order

The Delhi High Court observed:

  • Prima facie, there appears to be duplication in demand, as:
    • Reversal of ITC and
    • Demand on utilization of ITC
      essentially relate to the same amount.
  • However, considering the availability of statutory appellate remedy, the Court relegated the Petitioner to the Appellate Authority.
  • Importantly, the Court granted relief by directing that:
    • Pre-deposit shall be limited only to specific portions of the demand (para (ii), (iii), and (iv)).
  • The appeal was permitted to be filed without being rejected on limitation grounds, provided it is filed within the stipulated time.
  • The writ petition was disposed of accordingly. 

Important Clarification

  • The Court clarified that simultaneous demand for ITC reversal and its utilization may amount to duplication, indicating judicial concern over double taxation in GST proceedings.
  • Even when relegating parties to alternate remedies, the Court can grant protective relief regarding pre-deposit and limitation.

Sections Involved

  • Section 74, CGST Act, 2017 – Determination of tax due to fraud or wilful misstatement
  • Section 50, CGST Act, 2017 – Interest on delayed payment
  • Section 125, CGST Act, 2017 – General penalty
  • Section 75(13), CGST Act, 2017 – Penalty provisions
  • Section 74(11), CGST Act, 2017 – Conclusion of proceedings on payment
  • Relevant provisions of SGST Act and IGST Act (Section 20)

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/PMS30052025CW80282025_174112.pdf 

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