Madras HC Grants Interim Stay on ₹92 Cr GST Demand on Blocked ITC by Clubbing SCNs
In a significant relief to RMZ Infinity (Chennai) Pvt. Ltd., the Madras High Court has granted an interim stay against recovery of Rs. 92 Cr GST demand, arising from alleged blocked Input Tax Credit (ITC). The demand was made by clubbing multiple tax periods and invoking extended limitation under Section 74 of CGST Act.
Let us have a Short Overview of the case:
Background:
The petitioner, engaged in constructing commercial properties for leasing, initially did not claim ITC on construction goods/services, cautiously interpreting Section 17(5)(c) & (d).
Later, relying on the Orissa HC ruling in Safari Retreats, it claimed ITC for: FY 2018-19 and Q1 of FY 2019-20, through an intimation to tax authorities.
Key ITC Items Involved:
Mechanical Electrical & Plumbing, Lifts, DG Sets, Fire-fighting systems, HVAC, Furniture, Security Systems, UPS etc. – claimed as ‘plant’ assets based on functionality tests under Safari Retreats.
Grounds of Challenge:
The adjudication order brushed aside key judicial precedents, including SC’s ruling on ‘own account’ exception under Section 17(5)(d).
The Department allegedly failed to apply the functionality test to determine whether ITC should be denied.
Why This Matters:
This case highlights key concerns around:
Interpretation of blocked credits
Clubbing of SCNs across periods
Invoking extended period for ITC denial
Applicability of judicial precedents in departmental adjudication
Stay tuned for final outcome. This writ may redefine the scope of Section
17(5) ITC restrictions in real estate leasing businesses.
The copy of the order is as under:
