Mere Intimation To GST Authorities Does Not Create ITC Right Or Bar Section 74 Action: Madras High Court

The Madras High Court has held that mere communication to GST authorities expressing an intention to avail Input Tax Credit (ITC) does not create any legal entitlement to such credit and cannot shield a taxpayer from proceedings for wrongful availment under the GST law.

Justice C. Saravanan dismissed the petition filed by RMZ Infinity (Chennai) Pvt. Ltd., now known as Chennai Business Tower Private Limited, which had challenged an order confirming denial of ineligible ITC of Rs. 92.29 crore for the period between July 2017 and March 2023. He observed:

“Mere communication outside the GST regime, which was not responded to by the respondent, would not entitle the petitioner to bonafide believe that the petitioner was entitled to avail the blocked credit or that input tax credit was not on account of suppression of facts”.

RMZ Infinity is engaged in the business of renting and leasing immovable properties. It availed ITC on construction-related goods and services. The company initially refrained from claiming such credit due to restrictions under Sections 17(5)(c) and 17(5)(d) of the CGST Act. Later, it relied on the Orissa High Court's decision in Safari Retreats Pvt. Ltd. v. Chief Commissioner of CGST [2019 (25) GSTL 341] and informed GST authorities of its intention to claim ITC.

It also argued that such disclosure ruled out allegations of suppression and barred invocation of extended limitation under Section 74 of the CGST Act. Though initially, it sought approval for ITC claims of around Rs. 22.51 crore, it subsequently availed ITC amounting to Rs. 103.45 crore. It reversed Rs. 89.07 crore under protest during investigation.

The Court rejected the company's contention. It held that a mere intimation outside the statutory GST framework could not create a bona fide belief or confer entitlement to blocked credit without any approval or response from the department.

It further held that the absence of any approval or concurrence from the authorities meant that the taxpayer could not claim any vested right. It also held that the expansion of ITC claims from Rs. 22.51 crore to Rs. 103.45 crore justified invocation of the extended limitation period under the GST law.

The Bench also noted that reliance on Safari Retreats Pvt. Ltd. could not be sustained after the Supreme Court overturned the decision, which removed the foundation of the claim. It concluded that ITC on construction-related goods and services remained expressly blocked under Sections 17(5)(c) and 17(5)(d) of the CGST Act.

Accordingly, the High Court dismissed the petition and granted liberty to RMZ to file a statutory appeal within 30 days.

For Petitioner: Mr.Vijay Narayan Senior Counsel

For Respondent: Mr.Rajnish Pathiyil Senior Standing Counsel