Madras HC sets aside ITC eligibility order under Section 17(5), directs 25% tax deposit and fresh objections

The Madras HC set aside an order dated 27.11.2023 regarding ITC eligibility disputed under Section 17(5) blocked credit provisions. The petitioner was directed to deposit 25% of the disputed tax within four weeks. The impugned order was treated as a show cause notice, requiring the petitioner to submit objections with supporting documents within four weeks of receiving the court order. The petition was disposed of with these directions.

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Issues: Challenge to impugned order on Input Tax Credit (ITC) eligibility under Section 17(5) of GST Act for assessment year 2021-22.

Analysis:
The petitioner, a service provider, availed Input Tax Credit (ITC) on purchases made from registered persons in Tamil Nadu for their business operations. The purchases were supported by tax invoices, and the petitioner duly reported outward supplies in their monthly returns as per GST Act provisions. The Assistant Commissioner issued a Show Cause Notice alleging the ITC availed by the petitioner was ineligible under Section 17(5) of the GST Act. The petitioner was asked to pay taxes and interest before a specified date, followed by confirmation of proposals in impugned proceedings for the assessment period.

The petitioner relied on a recent judgment of the High Court in a similar case, where the matter was remanded back subject to payment of 25% of disputed taxes. The petitioner expressed readiness to pay 25% of the disputed tax and requested a final opportunity to present objections before the adjudicating authority. The respondent did not object to this request.

The High Court set aside the impugned order and directed the petitioner to deposit 25% of the disputed tax within four weeks. The impugned order was treated as a show cause notice, and the petitioner was granted four weeks to submit objections with supporting documents. Failure to pay the deposit or file objections within the stipulated period would result in the revival of the impugned order. The Court disposed of the writ petition with no costs, closing all connected miscellaneous petitions.

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