No Demand in DRC-07 if ITC Wrongly Availed Was Reversed; To Be Treated as Payment u/s 73 | HC

Case Details: Thirumagal Dyeing Works v. Joint Commissioner of GST and Central Excise - [2025] 170 taxmann.com 324 (Madras)

Judiciary and Counsel Details

• K. Kumaresh Babu, J.
• Mrs Hema Muralikrishnan, for the Petitioner.
• R. Nanda Kumar, Sr. Standing Counsel for the Respondent.

Facts of the Case

In the present case, the petitioner wrongly availed ITC and reversed it in the GSTR-3B return. Despite this, the proper officer issued a demand in DRC-07, demanding the same reversed ITC, prompting the petitioner to file the petition. The petitioner argued that the DRC-07 notice was erroneous, as reversal to be treated as payment under Section 73.

The department defended the notice, stating that the petitioner could challenge it through statutory remedies, such as an appeal. The department also cited technical limitations of the GST portal that prevented proper adjustment of the reversed ITC.

High Court Held

The Honorable High Court noted that the department had earlier treated the reversal as payment under Section 73 and found the demand in the DRC-07 notice inconsistent with this order. Therefore, the Court rejected the technical limitations argument and deemed the demand erroneous. The Court also set aside the demand for reversed ITC in the DRC-07 notice and allowed the petitioner to pursue remedies for other claims under the amnesty scheme.

List of Cases Referred to

• Asstt. Commissioner (CT) LTU v. Glaxo Smith Kline Consumer Health Care Ltd. [2020] 116 taxmann.com 417/36 GSTL 305 (SC) (para 5).