HC Quashes ITC Demand Order Lacking Findings on Utilisation

Case Details: Hoscar System (P.) Ltd. vs. Assistant Commissioner (ST) [2026] 184 taxmann.com 263 (Madras)

Judiciary and Counsel Details

• C. Saravanan, J.
• N. Viswanathan for the Petitioner.
• T.N.C. Kaushik, Additional Government Pleader for the Respondent.

Facts of the Case

The petitioner, a registered taxpayer, faced retrospective cancellation of GST registration pursuant to issuance of a show cause notice (SCN). Subsequently, a SCN in Form GST DRC-01 was issued proposing the demand on account of alleged excess availment of ITC. In the absence of any reply from the petitioner, an order in Form GST DRC-07 was passed determining the liability and noting the non-response. It was contended that the impugned order failed to specify whether the alleged excess IGST ITC had been utilised or remained unutilized, and lacked a clear factual determination on this point, rendering it unsustainable. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that a valid demand under Section 16 read with Section 73 of the CGST Act requires a clear finding regarding the nature and utilisation of ITC. It was observed that the impugned order did not disclose whether the excess IGST ITC had been utilised, which is a material factor in determining liability. The Court further noted that the absence of a speaking order and the lack of specific factual findings vitiated the adjudication process. Accordingly, the impugned order was quashed, the matter was remanded for fresh adjudication on merits within a stipulated period, and all recovery proceedings were directed to remain in abeyance pending such de novo proceedings.