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Case Law Details

Case Name : Jai Balaji Paper Cones Vs Assistant Commissioner (Madras High Court)
Appeal Number : W.P.No.6780 of 2020
Date of Judgement/Order : 03/07/2023
Related Assessment Year :

Jai Balaji Paper Cones Vs Assistant Commissioner (Madras High Court)

In a recent ruling, the Madras High Court addressed the issue of Input Tax Credit (ITC) and its eligibility for a registered person if the tax hasn’t been paid to the government. The case involved a company purchasing goods from a supplier with a cancelled GST registration. Despite having paid the amount to the supplier, the court decided that the company was not entitled to claim ITC. This article delves into the court’s reasoning, analysis, and the implications this ruling has on businesses dealing with similar situations.

Analysis: The court based its decision on Section 16(2)(c) of the Central Goods and Service Tax Act, which requires that the tax charged for a supply of goods or services must be actually paid to the government for a registered person to claim ITC. In this case, the supplier’s GST registration was cancelled before supplying the goods, making it evident that the supplier couldn’t have paid the tax to the government.

ITC cannot be claimed without payment of GST

The ruling serves as a significant precedent for businesses dealing with suppliers who have cancelled GST registrations. It clarifies that even if a registered person has paid the amount to the supplier, they cannot claim ITC if the supplier hasn’t paid the tax to the government.


1. The petitioner appears to have purchased a consignment of goods from the second respondent, from Gundur District, Andhra Pradesh vide three invoices dated 23.11.2018. The petitioner appears to have paid the amount to the second respondent’s. However, GST registration of the second respondent was earlier cancelled on 31.10.2018.

2. The case of the petitioner is that the petitioner has paid an amount of Rs.4,14,000/- to the second respondent by including the GST payable of Rs.4, 14,000/- on three invoices. It is therefore submitted that since the petitioner has paid the tax due on these three invoices dated 23.11.2018 to the second respondent, the petitioner cannot be asked to pay IGST.

3. The learned counsel for the first respondent submits that the ner is not entitled for the relief in view of Section 1 6(2)(c) of the Central Goods and Service Tax Act, 2017 r/w Rule 36(4).

4. I have considered the learned counsel for the petitioner and the learned Government Advocate for the first respondent.

5. Section 16(2) (c) of the Central Goods and Service Tax, reads as follows:-

“16(2)(c) : Subject to the provisions of Section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply”.

6. Thus, a registered person is not entitled to credit of input tax in respect of any supply of goods or services of both if tax is not paid to the Government. The registration of the second respondent has been cancelled on 31.10.2018 before three invoices dated 23.11.2018 were raised. Thus, it is clear that the second respondent could not have paid the tax to the ex-cheques.


Therefore, there cannot be a mandamus to the first respondent contrary to the provisions of the respective GST Act of 2017 and the Rules made thereunder. Therefore, there is no merits in the present writ petition. The petitioner is however entitled to recover the amount from the suppliers in the manner known to law.

7. The present writ petition stands dismissed with the above observation. No costs. Consequently, connected miscellaneous petition is closed.

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  1. Raghavendra Rao says:

    sir good morning.

    I request the author may kindly read pera 8 & 9 of Madras High court judgement on sec 16(2) of GST act.

    please don’t spread wrong assumptions through a reputed web site, 🙏

    1. TG Team says:

      Dear Sir,

      Thank you for your response. We appreciate your willingness to correct any wrong assumptions. Kindly clarify what are the wrong assumptions? Further what para 8 and 9 says. We will be happy to correct.

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