GST demand under Section 74 set aside after supplier paid tax and recipient's input tax credit required fresh adjudication.

Where a GST demand under Section 74 was based on alleged non-payment by the supplier, and the supplier later filed returns and paid the tax with interest, the existing adjudication could not stand without fresh examination of the recipient's entitlement to input tax credit and the underlying liability. The HC held that the changed factual position required reopening of the matter and reconsideration by the adjudicating authority in accordance with law. The impugned demand order was set aside, and the dispute was remanded for re-adjudication on liability and admissibility of the recipient's claim.

---

---

Issues: Whether the order issued under Section 74 of the Central Goods and Services Tax Act, 2017, raising demand on the basis of alleged non-payment of tax by the supplier, could be sustained after the supplier had deposited the tax along with interest and the recipient's entitlement to input tax credit had become available for reconsideration.

Analysis: The recorded instructions showed that the supplier had filed the pending returns and paid the tax with interest, and that the input tax credit was now available to the recipient. In these circumstances, the existing adjudication could not be treated as final without fresh consideration of the tax liability and the admissibility of the recipient's claim. The matter therefore required reopening and reconsideration by the adjudicating authority in accordance with law.

Conclusion: The impugned order was set aside and the matter was directed to be re-adjudicated by the authority concerned, including determination of any liability or acceptance of the claim as admissible under law.

Final Conclusion: The recipient's challenge succeeded to the extent of setting aside the existing demand order, but the dispute on liability and input tax credit was left for fresh adjudication by the authority.

Ratio Decidendi: Where the factual basis of a GST demand under Section 74 changes because the supplier has subsequently deposited the tax with interest and the recipient's input tax credit becomes available, the adjudication must be reopened and re-determined in accordance with law.

---