No GST Demand Where ITC Reversed Before SCN | HC

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ITC reversal before SCN

Case Details: Manoja Kumar Nayak vs. Commissioner Goods and Services Tax and Central Excise, Rourkela - [2026] 185 taxmann.com 501 (Orissa)

Judiciary and Counsel Details

  • Harish Tandon, CJ. & Murahari Sri Raman, J.
  • Rudra Prasad Kar, Sr. Adv., Asit Kumar Dash, Abhishek Dash & Aditya Narayan Ray, Advs. for the Petitioner.
  • Sujan Kumar Roy Choudhury & Mukesh Agarwal, Sr. Standing Counsels for the Respondent.

Facts of the Case

The petitioner, a GST-registered transporter, was issued a show cause notice under Section 74 alleging wrongful availment of IGST input tax credit (ITC) on the basis of fake invoices issued by a purportedly non-existent supplier. The proceedings were initiated largely on the basis of a DGGI alert and the supplier’s admission, without any independent verification. The petitioner had, however, already reversed the entire disputed ITC voluntarily through GSTR-3B prior to issuance of the SCN and maintained sufficient balance in the Electronic Credit Ledger. The SCN was issued for FY 2017–18 beyond the normal limitation period by invoking extended limitation.

High Court Held

The High Court held that proceedings under Section 74 were unsustainable as they were based solely on third-party statements without independent inquiry or evidence of fraud, wilful misstatement, or suppression. Invocation of extended limitation after expiry of the normal period was invalid. Further, since the petitioner had already reversed the ITC before issuance of SCN and had sufficient credit balance (with no utilisation of such ITC), no interest under Section 50 or penalty could be levied. Demand of tax equal to already reversed ITC amounted to impermissible double taxation. Accordingly, the SCN and resultant orders were quashed.

List of Cases Reviewed

List of Cases Referred to

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied