Lala Shivanath Rai Sumerchand Confectoner Private Limited Vs Additional Commissioner (Delhi High Court)
Delhi High Court has provided interim relief to M/s Lala Shivanath Rai Sumerchand Confectioner Private Limited, a firm operating a sweetmeat shop alongside a restaurant, in a case challenging a show cause notice and an Order-in-Original raising substantial Goods and Services Tax (GST) demands. The court, noting a “prima facie” indication of duplicated demands, has directed the petitioner to approach the Appellate Authority but significantly reduced the mandatory pre-deposit amount required to file the appeal.
The dispute stems from an Order-in-Original dated February 5, 2025, which confirmed various GST demands against the petitioner for the financial year 2017-18. The total confirmed demands ran into crores of rupees, encompassing ineligible input tax credit (ITC), short payment of tax, and penalties. The primary contention of the tax authorities, as outlined in the show cause notice, was that a restaurant, typically subject to a 5% GST rate, is not eligible to avail ITC. In contrast, the sweetmeat shop, which forms a part of the petitioner’s business, attracts a higher GST rate and is generally permitted to claim ITC.
The demands raised in the impugned order were multifaceted and included:
Ineligible Input Tax Credit (ITC): A significant demand of Rs 11,47,55,615/- for ITC allegedly used for discharging outward tax liability from financial year 2017-18 to 2022-23, deemed in contravention of Notification No. 46/2017 Central Tax (Rate) dated November 15, 2017. This demand was confirmed under Section 74(1) of the CGST Act, 2017, read with corresponding SGST and IGST Acts.
