Madras High Court Upholds GST Demand, Rejects ITC Claim Based on Fabricated Agreement

Court : Madras High Court

Brief :

The Madras High Court examined two writ petitions challenging GST assessment orders passed for the financial years 2022–23 and 2023–24. The petitioner, a proprietorship concern, had claimed Input Tax Credit on event management services allegedly provided by Rathod Enterprise.

During the assessment proceedings, the tax authorities identified several discrepancies in the agreement relied upon by the petitioner. Although the agreement was dated December 23, 2022, the stamp paper used for its execution had reportedly been purchased only on May 4, 2023. The concerned stamp vendor also stated that the stamp paper had not been sold by her and had allegedly been stolen.

The authorities further found that the petitioner had not produced the original agreement. Additionally, the invoices relied upon for claiming ITC were issued after cancellation of the supplier’s GST registration. Based on these findings, the authorities concluded that the contractual arrangement was fabricated and that no genuine business transaction had taken place between the parties.

The petitioner challenged the assessment orders and sought an opportunity to submit additional documents. It was also submitted that a substantial portion of the disputed tax demand had already been recovered. The State opposed the petitions, contending that the petitioner’s reply had been duly considered and that the orders were based on detailed factual findings. CA Sansaar

Citation :

Phoenix Marketing Solution v. Deputy State Tax Officer, W.P. Nos. 18739 and 18116 of 2026, decided on June 30, 2026, Madras High Court.

Judgement :

Justice Senthilkumar Ramamoorthy dismissed both writ petitions and upheld the GST demand, interest and penalty confirmed under Section 74 of the applicable GST enactments.

The Court observed that the petitioner was unable to controvert the factual findings recorded by the tax authorities regarding the fabricated agreement, the disputed stamp paper and the invoices issued after cancellation of the supplier’s GST registration.

The Court held that no infirmity was found in the assessment orders warranting interference under its discretionary writ jurisdiction. Accordingly, the tax, interest and penalty demands for the relevant financial years remained valid.

The Court observed:

“Learned counsel for the petitioner is unable to controvert the above findings. In these circumstances, I find no infirmity in the orders impugned herein warranting interference in exercise of discretionary jurisdiction.”