Court holds that burden of proof for input tax credit eligibility lies with claimant; orders rectification of GST DRC-07 errors caused by technical glitch and allows petitioners to seek exclusion of limitation period for pending writ
In a significant ruling dated October 13, 2026, the Delhi High Court (Division Bench comprising Justices Anil Kshetarpal and Bharat Parashar) disposed of the writ petition filed by M/s. Blue Star International Pvt. Ltd. and its directors challenging an adjudication order issued by the Additional Commissioner, CGST, Delhi South Commissionerate. The adjudication order had confirmed recovery of Rs. 12.88 crore from the petitioner company on account of alleged wrongful availing of input tax credit (ITC), along with interest and penalties under various provisions of the Central Goods and Services Tax (CGST) Act, 2017.
The petitioners contended that certain provisions of the CGST Act, specifically Sections 122(1A) and 155, should be read down in their case. They argued that Section 122(1A), which imposes penalties on directors, was prospective in nature and that Section 155, which places the burden of proof for ITC eligibility on the claimant, should be interpreted in light of the department's failure to return seized records critical for proving entitlement. Additionally, they challenged discrepancies in the GST DRC-07 demand summary, which showed a demand exceeding the amount specified in the show cause notice and confirmed order.
The Court observed that the petitioners had an efficacious statutory remedy in the form of an appeal under Section 107 of the CGST Act and were therefore not entitled to seek relief through writ jurisdiction. The Court relegated the petitioners to pursue their remedies through the appellate process, where all objections regarding demand, interest, penalties, and appreciation of evidence could be examined afresh. The Court also directed that the challenge to penalties under Section 122(1A) be examined in light of the recent judgment in Parag Garg v. Commissioner, Adjudication, CGST, Delhi West.
On the issue of burden of proof under Section 155, the Court clarified that the statutory allocation of burden remains with the person claiming ITC, irrespective of the availability of certain seized records. However, the Court acknowledged that the absence of particular documents and whether reconstructed or supplied materials were duly considered are matters that require factual examination and are properly within the appellate domain. The department's inability to furnish some seized documents must form part of the appellate authority's consideration when assessing if the burden has been discharged.
Importantly, the Court addressed the technical glitch in the GST portal that caused multiple erroneous demand summaries to be generated in Form GST DRC-07. The respondents were directed to rectify these errors within fifteen days so that the demand summaries accurately reflect the confirmed demand. Any statutory pre-deposit required for the appeal should be computed based on the actual demand confirmed by the impugned order, excluding the erroneous duplicated amounts shown in the portal.
The Court further held that the petitioners are entitled to file an application under Section 14 of the Limitation Act, 1963, for exclusion of the period during which the writ petition was pending. The appellate authority was directed to consider such application in accordance with law.
In conclusion, the Court disposed of the writ petition, emphasizing that nothing in its order should be construed as an opinion on the merits of the petitioners' entitlement to ITC or the disputed transactions.
Bottom Line:
CGST Act - Writ petition against adjudication order - When efficacious alternative remedy of appeal under Section 107 is available, High Court would relegate petitioners to appeal - Burden of proof under Section 155 regarding eligibility of ITC remains on claimant and need not be read down merely because some seized records are unavailable - Error in GST DRC-07 summary showing repeated demand directed to be rectified and pre-deposit to be computed on actual demand confirmed by impugned order.
Statutory provision(s):
Central Goods and Services Tax Act, 2017 Sections 14, 74(9), 75(7), 107, 122(1A), 122(3), 155
M/s. Blue Star International Pvt. Ltd. v. Union of India, (Delhi)(DB) : Law Finder Doc Id # 2999496
