TaxTMI 
TaxTMI 
22 Oct 2026 
We are living in the year 2026, which is the tenth year of the existence of the GST law in India. Raising irrational demands by State Tax Officials during the initial years is understandable. Only to curb this kind of practices and to make a full stop for frivolous demands the 57th GST Council meeting held on 08/10/2026 has approved several proposals which are in the process on implementation in due course. Be that as it may, a small taxpayer located in the State of Tamil Nadu was subjected to audit. The observations were duly replied. Though the audit officer was kind enough to drop two of the proposals based on our submission, a demand of Rs. 8,05,488 was raised as GST payable on creditors who were not paid as on 31/03/2023. It may be noted that the show cause notice pertains to the financial year 2022-23 and the same was issued only on 08/09/2026 as 30/09/2026 happens to be the last day for issuing such SCN.
The facts of the case are that the total trade payable as on 31/03/2023 as per audited financial statements stood at 44,74,930 and assuming the entire trade payables as due for payment for more than 180 days, the demand was proposed. The period pertains from 01/04/2022 till 31/03/2023 and the total purchases are at 8,59,54,620. With the best of our ability we demonstrated that the total creditors represent hardly 20 days of our total purchases and the entire creditors are due only for a maximum period of 60 days, whereas we pay advances as well as the required materials are required urgently for our business needs. Unfortunately, this concept was not understood or the officer pretends to be so. Be that as it may, now the case is live before the adjudicating authority.
I strongly felt that this kind of demand based on total non-application of mind must stop immediately and I should be the last person all over India to receive this kind of frivolous demand. Having said so, I was wondering as to how it is possible to raise a demand based on the whims and fancies of a tax official. On a careful thought I observe that the creditors as on 01/04/2022 as well as all purchases made till 31/12/2022 were fully paid with nil dues. Out of entire dues as on 31/03/2023, less than 10% are due for less than 90 days and less than 20% are due for less than 60 days and the remaining 70% of trade payable are older between 30 to 45 days only. However, the officer has proposed the demand in SCN stating that invoice wise payment details were not submitted. We tried with the ledger extract of three of our major suppliers, but the same was not considered.
The demand has been raised on entire purchase made during March 2023 even though technically they are less than 30 days old on the presumption that they are due for more than 180 days. A detailed examination of this issue has helped me to identify two decisions of the jurisdictional high court (High Court of Madras) and I thought it is worth to discuss the two case laws here for the benefit of all stakeholders.
Case Law 1: DSV Air and Sea Private Limited Versus State of Tamil Nadu, The Deputy State Tax Officer-1, Commissioner of Commercial Taxes, Chennai - 2024 (3) TMI 1276 - MADRAS HIGH COURT it was argued as "He also points out that the petitioner had replied to the show cause notice and stated that Input Tax Credit (ITC) was availed in accordance with law by paying for supplies received from the respective supplier within the specified 180 day period. In spite of such reply, he submits that the respondents imposed GST on the total trade payables and that the impugned order is vitiated on that account. Even with regard to the imposition of GST on inward supplies on which taxes were to be paid on reverse charge basis and ITC availed on import of services, learned counsel contends that the impugned order contains no reasons for recording the conclusion that the reply of the petitioner is not acceptable.
Accordingly, the order was quashed and remanded for fresh consideration.
Case Law 2: Ingram Micro India Pvt. Ltd., Represented by Shri. Rajat Kumar Samal Versus State Tax Officer - 2024 (1) TMI 1103 - MADRAS HIGH COURT case rued as "6. The assessing authority has clearly not applied its mind before drawing the conclusions extracted above. Therefore, the impugned order is liable to be and is hereby quashed. Consequently, the matter is remanded for reconsideration by the assessing authority. The assessing authority is directed to take into consideration all relevant documents produced by the petitioner, provide a reasonable opportunity to the petitioner and issue a fresh order within a period of two months from the date of receipt of a copy of this order. The writ petition is allowed on the above terms.
Conclusion: We are not living in initial years of GST. GST 2.O is in place since September 2025. The latest GST Council meeting held on 08/10/2026 has targeted a reduction of 10% in frivolous litigation as the one above. In this world, everything else are changing very fast. Artificial Intelligence is in place. Technology is getting updated day by day. The only resistance to change appears to be the mindset of the tax officials and that is why the process improvement is in fast track mode at top gear in GST Law. I appeal to all tax officials all over India to be vigilant in raising genuine demands only. As I am in the process of concluding the write up, GSTAT portal has already received 95,000 appeals and 9,846 appeals have already been admitted for hearing. A total number of 484 cases have already been disposed as final and few of such decisions are available to all stakeholders in the link https://www.gstat.gov.in/e-journals Tax officials are kindly requested to visit the above link on a monthly basis and get themselves constantly updated. If the OIO or OIA is quashed or set aside later, it speaks on the poor quality of the order.