Court Upholds Extended Limitation for Wrongful ITC and Validates November 2024 Assessment Orders

By | July 15, 2026
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Court Upholds Extended Limitation for Wrongful ITC and Validates November 2024 Assessment Orders

Court Upholds Extended Limitation for Wrongful ITC and Validates November 2024 Assessment Orders

Issue

  • Issue I (Extended Period of Limitation): Whether the tax department is justified in invoking the extended period of limitation under Section 74 based on the wrongful availment of ITC in excess of GSTR-2A and the non-payment of reverse charge tax on foreign commissions.

  • Issue II (Section 73 Limitation Period): Whether the assessment orders passed in November 2024 for FY 2018-19 and FY 2019-20 are barred by limitation under Section 73.

Facts

  • A surprise inspection was conducted at the petitioner’s premises, following which discrepancies were recorded and an intimation in Form GST DRC-01A was issued.

  • The department issued Show Cause Notices (SCNs) in Form GST DRC-01 proposing tax determinations under Section 74 for the periods FY 2018-19 to FY 2022-23.

  • The records established that the petitioner had availed Input Tax Credit (ITC) in excess of what was reflected in Form GSTR-2A and utilized the same in Form GSTR-3B.

  • The petitioner had also failed to pay reverse charge tax on commissions paid to foreign booking agencies.

  • After the petitioner submitted replies, the impugned assessment orders were passed by the department in November 2024.

  • The petitioner challenged these orders via writ petitions, asserting that the department could not invoke Section 74 and that the demands for FY 2018-19 and FY 2019-20 were barred by limitation even under Section 73.

Decision

  • In favor of Revenue (Section 74 Invocation): Held that the excess availment and subsequent utilization of ITC constitutes a prima facie wrongful availment, which effectively amounts to the suppression of facts with an intention to evade tax.

  • In favor of Revenue (Section 74 Invocation): Held that the statutory threshold required to invoke the extended period of limitation under Section 74 of the GST regime is lower than that under earlier indirect tax enactments. The invocation of Section 74 is therefore entirely justified on these facts.

  • In favor of Revenue (Section 73 Timelines): Held that as per the binding precedent in Tata Play Ltd. v. Union of India, the limitation period for passing orders under Section 73 for FY 2018-19 and FY 2019-20 had not expired by November 2024 due to valid statutory extensions.

  • In favor of Revenue (Dismissal): Held that the challenge to the impugned orders lacks merit. The writ petitions are dismissed, with liberty granted to the petitioner to pursue regular statutory appellate remedies.

Key Takeaways

  • Lower Threshold for Suppression under GST: Under the GST framework, utilizing ITC in excess of GSTR-2A amounts to a prima facie suppression of facts, making it easier for the department to invoke the extended five-year limitation period under Section 74.

  • Reassessment Timelines Extended: Statutory extensions granted for early GST years (FY 2018-19 and FY 2019-20) legally keep the limitation window open, meaning orders passed as late as November 2024 under Section 73 are within the prescribed time limits.

HIGH COURT OF MADRAS
Sameera Hotels (Chennai) (P.) Ltd.
v.
State Tax Officer (Inspection-I)
C.Saravanan, J.
W.P. Nos. 33258, 33262, 33268, 33272 and 33275 of 2025
W.M.P. Nos. 37386, 37388, 37391, 37392, 37395, 37396, 37404, 37405, 37410 and 37412 of 2025†
JUNE  8, 2026
Mrs.G.Vardini Karthik for the Petitioner. C. Harsharaj, Special Government Pleader for the Respondent.
ORDER
1. By this Common Order, all these Writ Petitions are being disposed of.
2. These cases were heard along with a batch of 250 Writ Petitions and as one of the 53 Writ Petitions which were finally heard on the larger issue regarding the challenge to the proceedings under Section 74 of the respective GST Enactments.
3. By a Common Order today in Turbo Energy (P.) Ltd. v. Additional Commissioner [W.P. No. 2142 of 2026, dated 8-6-2026], Fastenex(P.) Ltd. v. State Tax Officer [W.P. Nos. 35967, 35970, 35974 and 35976 of 2024, dated 8-6-2026] and Ispahani Estates (P.) Ltd. v. State Tax Officer [W.P. Nos. 14487, 14492 and 14500 of 2025, dated 8-6-2026], a detailed order has been passed insofar as the invocation of extended period of limitation under Section 74 of the respective GST Enactments.
4. In these Writ Petitions, the Petitioner has challenged the respective Impugned Orders, as detailed below:-
S.No. Writ Petition Assessment Year Date of Show Cause Notice in GST DRC-01 Date of Impugned Order
1 33258 of 2025 2018-2019 31.07.2024 07.11.2024
2 33262 of 2025 2019-2020 31.07.2024 09.11.2024
3 33268 of 2025 2020-2021 31.07.2024 11.11.2024
4 33272 of 2025 2021-2022 31.07.2024 12.11.2024
5 33275 of 2025 2022-2023 31.07.2024 13.11.2024

 

5. It is the case of the Petitioner that a surprise Inspection was conducted by the 1st Respondent on 09.05.2024, under the Authorization of the 3rd Respondent, at the business premises of the Petitioner.
6. Pursuant to the said Inspection, the Petitioner was issued with an Intimation Notices in GST DRC-01A dated 02.07.2024, pointing out certain discrepancies. This was followed by Show Cause Notices in GST DRC-01 dated 31.07.2024 for the respective Tax Periods, proposing to determine tax under Section 74 of the respective GST Enactments.
7. The Petitioner replied to the respective Show Cause Notices on 14.08.2024 and 16.08.2024, which has culminated in the respective Impugned Orders.
8. The learned counsel for the Petitioner would submit that though the Department has invoked Section 74 of the respective GST Enactments in the respective Show Cause Notices dated 31.07.2024, the Notices have not particularized the ingredients and therefore, the Impugned Orders are liable to be quashed.
9. That apart, it is submitted that the Impugned Orders merely use the term “willfulness” in the conclusion for sustaining the demands under Section 74 of the respective GST Enactments. They are reproduced below:-
W.P.Nos.33258, 33262, 33268 and 33272 of 2025
“The claim of ITC under IGST was not proved, and the tax due on the import of service was not paid. This shows the willfulness on the part of the taxable persons.”
W.P.No.33275 of 2025
“The reconciliation of ITC under CGST and SGST was not proved, and the tax due on the import of service was not paid. This shows the willfulness on the part of the taxable person.”
10. However, the learned counsel for the Petitioner would fairly concede that for the Tax Period 2018-2019 and 2019-2020, the last date for passing the orders under Section 73 of the respective GST Enactments would have expired on 28.02.2025 and that the Impugned Orders have been passed in time.
11. The learned Special Government Pleader for the Respondents would defend the impugned proceedings stating that, apart from the fact that the orders are to be held in time even if Section 73 was to be made applicable, the proceedings are in time. That apart, it is for the Petitioner to convince that the order can be passed in terms of Section 75(2) of the respective GST Enactments.
12. It is submitted that the fact remains that no mention regarding the same was made by the Petitioner in reply dated 16.08.2024 in response to the Show Cause Notices in GST DRC-01 dated 31.07.2024.
13. It is therefore submitted that the reply filed by the Petitioner in response to the Notice was on the merits of the case and not on the jurisdiction to pass an order under Section 74 of the respective GST Enactments.
14. It is submitted that, admittedly, the Show Cause Notices in GST DRC-01 dated 31.07.2024 were issued for the respective Tax Periods by invoking the ingredients and for sustaining the impugned demand under Section 74 of the respective GST Enactments.
15. It is submitted that these Writ Petitions have been filed belatedly beyond the time prescribed for filing an appeal under Section 107 of the respective GST Enactments, and therefore these Writ Petitions are liable to be dismissed in terms of the decision of the Hon’ble Supreme Court in Asstt. Commissioner (CT) LTU v. Glaxo Smith Kline Consumer Health Care Ltd. /36 GSTL 305 (SC)/2020 SCC Online SC 440.
16. I have considered the arguments advanced by the learned counsel for the Petitioner and the learned Special Government Pleader for the Respondents.
17. There is no dispute that the Petitioner has availed Input Tax Credit in excess of the amount reflected in GSTR-2A for discharging the tax liability in GSTR-3B.
18. Thus, there are prima facie indications that the Petitioner had wrongly availed Input Tax Credit and utilized the same to discharge the tax liability in GSTR-3B. Thus, there is suppression of fact with an intention to evade tax.
19. This is in view of the Common Order passed in the batch today by a Separate Order, wherein it has been explained in detail that the threshold for invoking the extended period of limitation under Section 74 of the respective GST Enactments is much lower compared to the earlier Indirect Tax Legislations.
20. That apart, it is the contention of the Petitioner that the proceedings were time barred, the issue is now covered against the Petitioner in terms of the decision of this Court in Tata Play Ltd. v. Union of India (Madras)/W.P. No. 17184 of 2024 etc., batch dated 12.06.2025 as modified by 05.11.2025 [(2025) 32 Centax 318], wherein, for at least 2 of the Assessment Orders concerned herein i.e., 2018-2019 and 2019-2020, the time for passing orders under Section 73 of the respective GST Enactments itself would have not expired.
21. That apart, there are indications that the Petitioner has also not discharged the tax liability on Reverse Charge Mechanism on the commissions received from the Foreign Booking Agencies.
22. Therefore, there are no merits in these Writ Petitions insofar as challenge to the Impugned Orders under Section 74 of the respective GST Enactments. Therefore, these Writ Petitions are liable to be dismissed.
23. Accordingly, these Writ Petitions are dismissed with liberty to the Petitioner to work out the remedy on merits before the Appellate Commissioner.
24. The Petitioner shall file an appeal before the Appellate Commissioner within a period of 30 days from the date of receipt of a copy of this order, in which case, the Appellate Commissioner shall entertain and dispose of the appeal on merits subject to the Petitioner complying with the requirements of Section 107 of the respective GST Enactments. No costs. Connected Writ Miscellaneous Petitions are closed.