The Madras High Court has quashed a GST assessment against Indian Railway Finance Corporation Ltd, sending the case back to tax authorities for a fair re-evaluation of input tax credit and reverse charge claims, highlighting procedural irregularities in the original order.
The Madras High Court has set aside a GST assessment and recovery notice issued to Indian Railway Finance Corporation Ltd, or IRFC, after finding that tax officials had not properly dealt with the company’s arguments over input tax credit and reverse charge liability. Justice Senthilkumar Ramamoorthy remitted the matter to the tax department for a fresh decision after hearing the company in person.
According to reports on the ruling, the dispute arose from an assessment for the 2020-21 financial year and a recovery notice issued in June 2023 by the Assistant Commissioner (State Tax), Park Town Assessment Circle in Chennai. IRFC argued that it had responded to every point in the show-cause notice, but the assessing officer did not examine a key submission: that where tax is paid under the reverse charge mechanism, the relevant invoice for limitation purposes is the one issued by the recipient after payment, not the supplier’s invoice. The company said this meant its claim for credit fell within the permitted time under the GST law.
The court also criticised the way the demand was worked out. It noted that the officer appeared to have treated excess input tax credit reflected in GSTR-2A as if it had lapsed, a method the court said was not supported by the statute. One report said the disputed IGST credit alone was about ₹15.44 crore, while other summaries placed the overall demand at about ₹230.55 crore, underscoring the scale of the case. The bench said the assessment order failed to deal with the company’s legal points and could not stand as issued.
The case has now been sent back to the tax authority for fresh adjudication. The department has been told to give IRFC a proper chance to reply, including a personal hearing, and then pass a new order within three months. The ruling fits into a wider set of GST disputes in which courts have intervened where authorities were found to have overlooked taxpayer submissions or expanded proceedings beyond the scope of the original notice.
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