High Court Rejects GST Tax Demand Challenge Filed Too Late - Must Use Proper Appeal Process First

The Hon'ble Orissa High Court in M/s. Savitri Industries v. Chief Commissioner of CT & GST, Banijyakar Bhawan, Cantonment Road, Cuttack & Ors. (W.P.(C) No.17292 of 2025) held that a writ petition challenging GST demand order filed beyond the outer limit specified under Section 107(4) of the GST Act is not entertainable. The Court dismissed the petition filed against disallowance of Input Tax Credit on grounds of delayed filing and availability of alternative remedy.

Facts of the Case

The Petitioner was a small-scale industry registered with the District Industries Centre, Nagpur. Upon scrutiny of self-assessment returns furnished under Section 39 of the GST Act, the Petitioner was requested by a notice in GST ASMT-10, dated September 8, 2022 to reverse Input Tax Credit of Rs.4,82,531/- availed for the periods August, September, October and November of 2019 under Integrated Goods and Service Tax Act, 2017 with respect to transactions effect with M/s. KVR Industries Limited, Sarasanapalli assigned with GSTIN37AACCK7954J1Z1. Consequent thereto finding there was a discrepancy in Form GSTR-3B vis-à-vis claim of ITC, a proceeding under Section 73 of the GST Act was undertaken, but said proceeding was dropped on the ground that a proceeding under Section 74 of the GST Act had already been initiated.

Proceeding under Section 74 of the GST Act, on participation by the Petitioner and production of books of accounts and documents, culminated in demand, which was reflected in the order in DRC-07, dated February 25, 2025. The impugned order dated February 25, 2025 passed in GST DRC-07 by the Deputy Commissioner of State Tax, Cuttack-I West Circle, Cuttack raised a demand to the tune of Rs.13,63,646/- comprising tax (Rs.4,82,531/-), interest (Rs.3,98,584/-)and penalty (Rs.4,82,531/-) for the tax periods from April, 2019 to March, 2020 invoking power under Section 74 of the Odisha Goods and Services Tax Act, 2017/the Central Goods and Services Tax Act, 2017.

The entire demand under Section 74 of the GST Act had been raised on account of disallowance of ITC on the transactions effected with M/s. KVR Industries Limited as the said supplier had not discharged its tax liability as a consequence of which the Assessing Officer invoked Section 16(2)(c) of the GST Act. The ITC availed by the Petitioner was on account of tax paid to the supplier and the same was reflected in self-assessment returns in Form GSTR-2A. The supplier did not file its returns in GSTR-3B for the months of August, 2019, September, 2019, October, 2019 and November, 2019.

While the impugned order was passed on February 25, 2025, the writ petition was filed on June 13, 2025. The Petitioner was aggrieved by the disallowance of ITC merely because the supplier did not file its returns, contending this amounted to directing the recipient to discharge the liability of supplier and constituted double taxation.

Issue

Whether a writ petition challenging GST demand order can be entertained when filed beyond the limitation period specified under Section 107 of the GST Act and whether disallowance of Input Tax Credit due to supplier's non-filing of returns is legally sustainable.

Held by the Court

The Hon'ble Orissa High Court in M/s. Savitri Industries v. Chief Commissioner of CT & GST, Banijyakar Bhawan, Cantonment Road, Cuttack & Ors. (W.P.(C) No.17292 of 2025) held that:

The Court observed that Section 107(1) of the GST Act provides that any person aggrieved by any decision or order passed under the Act may appeal to the Appellate Authority within three months from the date on which the said decision or order is communicated to such person. Sub-section (4) provides that the Appellate Authority may, if satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of three months, allow it to be presented within a further period of one month. The Court held that bearing in mind the outer limit so fixed under sub-section (4) of the GST Act, 2017, it is surfaced from record that the writ petition has not been filed within the period stipulated under sub-section (1), and there is no pleading in the writ petition as to why the same could not be filed within the normal specified period.

The Court noted that though it is conscious that the law of limitation does not apply to writ jurisdiction, yet, no reason is forthcoming as to why there was delay in filing writ petition within the condonable period as specified under sub-section (4). The Court referred to its earlier decision in Bikash Panigrahi v. The Commissioner Commercial Tax CT and Goods and Service Tax and others, W.P.(C) No.12755 of 2025, disposed of on July 15, 2025, where the Court declined to entertain the writ petition, which was filed beyond the outer-limit specified under sub-section (4) of Section 107 of the GST Act. The Court held that in the present matter, it is perceived that the Petitioner has not approached the Court within the period specified under sub-section (1) of Section 107 of the GST Act; as a consequence of which, exercise of discretion to entertain the writ petition is not deemed warranted.

The Court held that disallowance of ITC on the premise that the supplier having not discharged its liability by furnishing statutory returns, the availment of ITC by the recipient whether is in conformity with statutory requirement could be subject-matter of examination and determination by the appellate authority on merits. The Court observed that to have clear-cut finding on this aspect the appellate authority is vested with the power to reappreciate evidence already adduced during the course of proceeding under Section 74 and/or to be adduced before him. The Court noted that in the instant case since the supplier is alleged not to have discharged its tax liability by furnishing returns with respect to transactions effected with the Petitioner during August, September, October and November of 2019, the Assessing Authority having perused the books of accounts vis-à-vis documents furnished before him raised the demand on appreciation of evidence.

The Court extensively quoted from its decision in Transtech Solution v. The Commissioner of CT & GST and others, W.P.(C) No.13821 of 2025, disposed of on July 24, 2025, where it held that delving into such dispute at the stage when the reply of the Petitioner is pending adjudication would be to resolving factual anomaly by the writ Court, and the Court desists from doing such exercise. The Court also referred to the Delhi High Court decision in Banson Enterprises v. Assistant Commissioner, W.P.(C) No.6503 of 2025, decided on May 15, 2025, which held that a writ petition can be entertained under exceptional circumstances only where there is: (i) a breach of fundamental rights; (ii) a violation of the principles of natural justice; (iii) an excess of jurisdiction; or (iv) a challenge to the vires of the statute or delegated legislation.

The Court held that on the principle for entertainment of writ petition against order for which alternative remedy is available under the statute, when the present writ petition is tested, the averments and fact-situation narrated by the Petitioner do not seem to have fallen within such parameters. The Court observed that in the present case, since the disputed questions of fact are involved, the Court is of the considered view that the appellate authority is the competent authority to deal with the facts as well as the law. The Court held that the issues raised in the present case can very well be addressed to in appeal under Section 107 of the GST Act, and accordingly the Court is not inclined to exercise its discretionary extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India.

Relevant Sections

Section 107(1) and (4) of the GST Act: "(1) Any person aggrieved by any decision or order passed under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person. (4) The Appellate Authority may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of three months or six months, as the case may be, allow it to be presented within a further period of one month."

Section 16(2)(c) of the GST Act: Relating to conditions for availing Input Tax Credit including requirement of supplier discharging tax liability.

Section 74 of the GST Act: Provision for determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilful-misstatement or suppression of facts.

Articles 226 & 227 of the Constitution of India: Empowering High Courts to issue writs and exercise supervisory jurisdiction over subordinate courts and tribunals.

Pari Materia / Cases Referred

1. Bikash Panigrahi v. The Commissioner Commercial Tax CT and Goods and Service Tax and others W.P.(C) No.12755 of 2025, disposed of on July 15, 2025 - Court declined to entertain writ petition filed beyond outer-limit specified under Section 107(4) of GST Act.

2. Transtech Solution v. The Commissioner of CT & GST and others W.P.(C) No.13821 of 2025, disposed of on July 24, 2025 - Court held that delving into disputed facts would be resolving factual anomaly by writ Court and desisted from such exercise.

3. Banson Enterprises v. Assistant Commissioner W.P.(C) No.6503 of 2025, decided on May 15, 2025 (2025 SCC OnLine Del 3952) - Delhi High Court held writ petition can be entertained under exceptional circumstances only involving breach of fundamental rights, violation of natural justice, excess of jurisdiction, or challenge to vires.

4. Assistant Commissioner of State Tax v. Commercial Steel Limited (2021) 7 SCR 660 - Supreme Court held writ petition can be entertained under exceptional circumstances only.

5. Elesh Aggarwal v. Union of India (Neutral Citation: 2023:AHC:121765-DB) - Allahabad High Court held no ground is made for interference on merits in exercise of extraordinary jurisdiction.

6. Mukesh Kumar Garg v. Union of India & Ors. W.P.(C) 5737 of 2025 (decided on May 9, 2025 reported at 2025 SCC OnLine Del 3324) - Delhi High Court held where cases involving fraudulent availment of ITC are concerned, writ jurisdiction ought not to be usually exercised.

7. Orissa Mineral Development Company Ltd. v. Commissioner of Sales Tax, Orissa (1960) 11 STC 12 (Ori) = AIR 1960 Ori 79 - Cited for principle of alternative remedy.

8. Santoshi Tel Utpadak Kendra v. Deputy Commissioner of Sales Tax (1982) 1 SCR 97 = (1981) 48 STC 248 (SC) - Supreme Court held appellate authority has power to enhance assessment and second appeal is continuation of assessment process.

   
   

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