The Madurai Bench of the Madras High Court has quashed an assessment order that refused Input Tax Credit ( ITC) under Goods and Services Tax ( GST ) on the pretext of purchases made from allegedly non-existent suppliers in connection with a government contract. The Court remanded the case for fresh adjudication, subject to a 25% pre-deposit of the disputed tax demand.
According to the facts, an assessment order was issued under section 74 of the Tamil Nadu Goods and Services Tax (TNGST) Act. The GST department had scrutinised the records of the taxpayer and noted that the business transactions were only “bill trading” exercises without any actual movement or physical supply of goods.
The authorities denied the GST Input Tax Credit (ITC) claimed by the petitioner, arguing that the suppliers in question were non-existent entities.
The petitioner, Sri Subramanian Industries, which mainly executes government contracts, contended that their business operations were completely legitimate. They asserted that the materials in question, specifically bathroom and toilet doors, were genuinely procured, supplied, and installed in government properties.
Also, the applicant claimed that the suppliers held valid GST registrations when the transactions took place, and these registrations were only cancelled retrospectively by the department.
Adv. A.Satheesh Murugan, the counsel of the taxpayer, said that they hold all the tax invoices and transport documents to establish the movement of goods, but were stopped from producing them at the time of the initial proceedings because of a situation beyond their control.
The Department of Revenue claimed that the regulatory burden of proof is on the person claiming the ITC.
The department mentioned that, as the taxpayer did not provide the requisite documentary evidence to prove the physical movement of goods and the physical existence of the suppliers at the time of the initial phase, the refusal of the credit was explained.
After hearing the matter, Justice D. Bharatha Chakravarthy said, “It is true that the burden of proof is only on the petitioner/assessee. However, considering the submissions made that the goods were actually procured and supplied to the Government and that the registration of the suppliers was in existence as on the date of the transaction, and it is now submitted that the petitioner has proof for the movement of goods.”
“I am of the view that the petitioner can be given an opportunity. Considering the lapse of time, the same can be granted only on the condition of deposit of 25% of the disputed tax,” decided the bench.
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Post completing this deposit prerequisite, the assessing authority has asked to take up the case for fresh consideration. Also, the applicant was asked to submit the other responses and file all the evidentiary documents.
| Case Title | Tvl. Sri Subramanian Industries Vs. State Tax Officer |
| Case No. | W.P(MD)No.11892 of 2026 |
| Counsel For Petitioner | Mr.A.Satheesh Murugan |
| Counsel For Respondent | Mr.R.Suresh Kumar Additional Government Pleader |
| Madras High Court | Read Order |
