The Hon’ble Calcutta High Court in Tara Lohia Private Limited v. Additional Commissioner, CGST & CX, WPA 9655 of 2025, July 9, 2025, held that assesses must prove through bank statements or equivalent evidence that supplier payments were made within 180 days to retain ITC under Section 16(2) of the Central Goods and Services Tax (hereinafter referred to as “CGST”) Act, 2017. Failure to do so justifies ITC reversal. The Hon’ble Calcutta High Court declined to interfere, noting the issue involved errors within jurisdiction, and directed the Petitioner to pursue the appellate remedies.
FACTS
Tara Lohia Private Limited (hereinafter referred to as the “Petitioner”), a trading concern, underwent an audit under Section 65 of the West Bengal Goods and Services Tax Act, 2017 (hereinafter referred to as the “Act”), which culminated in the initiation of proceedings under Section 74 of the Act by way of an adjudication order.
The adjudication covered the tax periods from July 2017 to March 2022 and included several demand heads, most notably the claim of irregular Input Tax Credit (hereinafter referred to as the “ITC”) utilization. As required by the second proviso to Section 16(2) of the CGST Act, 2017, payments to various creditors were not made within the 180-day statutory period, which was the basis for the denial of ITC.
In response to the audit observation documented in the ADT-2 report, the Petitioner submitted a detailed written reply along with a creditor-wise chart, asserting that payments were in fact made within the prescribed 180-day period to all creditors except for one, namely, M/s Unique Safety.
The Petitioner maintained that the ledger figures reflected as sundry creditors in the balance sheet or profit and loss account could not be equated to a default in payment beyond the statutory period, and that the Department (hereinafter referred to as the “Respondents”) had failed to consider the accurate transactional sequence and documentary evidence submitted.
Despite these submissions and clarifications, the Respondents proceeded to pass the Impugned Order under Section 74 of the Act, wherein it was observed that the submission of documentary proof, specifically bank statements evidencing payment within the prescribed period, was not made.
Consequently, the Respondents concluded that the Petitioner had failed to demonstrate timely discharge of liabilities and disallowed the ITC claimed, also imposing interest and penalty accordingly.
Aggrieved by this Impugned Order, the Petitioner invoked the Writ Jurisdiction under Article 226 of the Constitution of India by approaching the Hon’ble Calcutta High Court, challenging the adjudication on the grounds set forth.
ISSUES
- Whether writ interference under Article 226 lies against a Section 74 order reversing ITC on the 180-day payment ground?
CONTENTIONS OF THE PARTIES
The Petitioner confines the challenge to the specific heads of ITC arising from the audit exercise and submits that the Writ Petition is directed solely against the determinations flowing from the audit-triggered show cause notice.
The Petitioner asserts, without providing any evidence, the Respondents unlawfully treated the figures reflected against various creditors in the accounts as though they represented invoices that had not been paid after the 180-day statutory period, invoking the second proviso to Section 16(2) of the CGST Act. According to the Petitioner, only one creditor, namely M/s Unique Safety, allegedly had a delayed payment beyond the statutory timeline. This objection was raised at the audit stage and reiterated in subsequent replies.
Further, the Petitioner submits that a ledger or balance-sheet entry cannot, by itself, suffice to establish a delay in payment exceeding 180 days. Although the Respondents noted the Petitioner’s explanation, it appears to have been dismissed solely on the ground that bank statements corroborating timely payment were not annexed. Since the adjudication proceeded on the basis of audit observations, the Respondents had the opportunity and discretion to call for vouchers, bank statements, and other relevant documents during the audit process. Consequently, the he contends that it ought not to be prejudiced or penalized for any failure on the part of the Respondents to procure such evidence during the audit.
The Petitioner highlights that the taxpayer has no control over the data produced by the supplier’s filings with regard to other contested ITC heads, such as blocked credits, ineligible credits, and differences between the claimed credit and the provided data in GSTR-2A and 2B.
The Petitioner further asserted that the credits were claimed only on genuine and relevant purchases, and that these explanations were inadequately considered or improperly rejected by the adjudicating authority.
On this foundation, the Petitioner characterizes the approach of the authorities as a jurisdictional error, contending that Writ Jurisdiction is maintainable notwithstanding the existence of statutory appeals. The Petitioner argues further that the contested order should be overturned, and the case remanded for further consideration, mainly citing the Hon’ble Supreme Court’s ruling in Raza Textiles Ltd. v. Income Tax Officer, (1973) 1 SCC 633.
The Respondents on the contrary, opposed the petition and proceeded to discuss the substantive merits, reserving the right to argue that the writ cannot be maintained due to the availability of an alternative remedy.
The Respondents contended that the Petitioner failed to discharge the onus of furnishing documentary evidence, particularly bank statements, to establish that payments to sundry creditors were made within the prescribed 180-day period and the ITC reversal was warranted in the absence of such proof.
Furthermore, the Respondents submit that the burden to produce primary evidence cannot be shifted onto the Respondents once the Petitioner fails to provide it. Regarding the other ITC-related matters, they assert that the Petitioner failed to produce appropriate supporting documentation; accordingly, no error is attributable to the authorities who acted within their jurisdiction.
Having regard to the availability of statutory appeal remedies, the Respondents seek dismissal of the writ petition.
DECISION AND FINDINGS
The main issue in the Writ Petition, according to the Hon’ble Calcutta High Court, was how the CGST Act’s proviso to Section 16(2) handled the statutory 180-day payment requirement and the resulting reversal of ITC. The record revealed that following the issuance of the ADT-2 audit report, the Petitioner submitted a detailed reply along with a creditor-wise chart indicating that, except for one creditor, that is M/s Unique Safety, payments had been made within the prescribed timeframe.
Despite considering these explanations, the Respondents held that the Petitioner failed to substantiate its claim due to the absence of corroborative bank statements or equivalent documentary evidence demonstrating payment within the statutory window. The Hon’ble Calcutta High Court affirmed this approach, emphasizing that the onus to furnish such primary evidence squarely rested upon the Petitioner.
Further, the Hon’ble Calcutta High Court observed that even at the stage of hearing the writ petition, no satisfactory documentary proof had been placed on record to establish that payments to creditors had indeed been made within the 180-day period.
Regarding other disputed ITC heads raised in the petition, including those relating to blocked credit, ineligible credit, and discrepancies vis-à-vis GSTR-2A or GSTR-2B, the Hon’ble Calcutta High Court recorded that the Respondents had duly examined the relevant issues and concluded that due to the Petitioner’s failure to produce adequate supporting documents, no relief could be granted in respect of these claims.
On the legal question of the scope of writ review under Article 226 of the Constitution, the Hon’ble Calcutta High Court reiterated the settled position that, as a general rule, writ courts refrain from interfering with orders which are appealable under the statutory framework. Only challenges raising jurisdictional errors, where the adjudicating authority acts wholly without jurisdiction or violations of the principles of natural justice are entertained in writ jurisdiction.
In the current case, the Hon’ble Calcutta High Court found no jurisdictional issue at all; rather, the dispute centered on the evaluation of the evidence and factual conclusions. It held that such jurisdictional challenges must relate to true jurisdictional facts and the mere allegation of error in appreciation or decision-making does not justify exercise of writ jurisdiction.
The Hon’ble Court further noted that the Petitioner’s reliance on the decision in Raza Textiles Ltd. v. Income Tax Officer was misplaced. The principle enunciated in Raza Textiles involves cases where an authority assumes jurisdiction by erroneously deciding a jurisdictional fact. The Hon’ble Calcutta High Court distinguished the facts of the present case, concluding that the said principle was inapplicable here, given the Respondents actions fell within its competent jurisdiction.
As a result, the writ petition was denied without affecting the decision-making process. The Hon’ble Calcutta High Court clarified that since the Petitioner had consciously elected to invoke writ jurisdiction, the issues adjudicated upon in this writ petition stood finally decided and could not be re-agitated before the appellate authority.
However, the Hon’ble Calcutta High Court observed that if the Petitioner wishes to raise any fresh grounds or issues which were not canvassed in the writ, it may do so in the statutory appeal provided such grounds are lawfully permissible and are filed within four weeks from the date of the order. The Appellate Authority was directed to hear and dispose of such appeals expeditiously upon fulfillment of procedural formalities.
AMLEGALS REMARKS
This case clarifies that disputes over ITC depend on strong primary evidence. Balance-sheet entries alone cannot prove compliance with the 180-day payment rule; only bank statements and payment proofs suffice. Though proceedings arise from an audit, the taxpayer must bear the burden to produce clear documentary proof. Without these, the tax authorities are justified in disallowing credit, and courts will not fill evidentiary gaps for the taxpayer.
The Hon’ble Calcutta High Court rightly restricted its intervention, reaffirming that appellate forums, not writ courts, are the proper venue to challenge disputed factual findings. The Petitioner’s reliance on the case of Raza Textiles failed because that case addressed jurisdictional overreach, unlike this case where the authority acted within its power but possibly erred in evidence appreciation.
Practically, taxpayers must present complete and detailed evidence, such as bank statements mapping to each invoice, vendor reconciliations, and third-party confirmations, at the adjudication stage. In cases involving auto-populated GST data, demonstrating eligibility under the law independent of supplier filings is critical.
If an adverse order is passed despite evidence, swift appeal with a focused argument on correcting evidentiary lapses is essential. Any delay or inadequate representation risks losing the opportunity for relief.
– Team AMLEGALS assisted by Ms. Tanisha Khandelwal (Intern)
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