GST Sections 73 & 74 Inapplicable to Pre-GST VAT Input Tax Credit Disputes: Punjab & Haryana High Court Rules in Shiv Shakti Trading Co. Case

Background and Overview

The Punjab and Haryana High Court has delivered a significant ruling in Shiv Shakti Trading Co. Vs State of Haryana And Others, holding that proceedings initiated under Section 73 and Section 74 of the GST statutes cannot be invoked to adjudicate disputes relating to input tax credit (ITC) availed under the erstwhile Haryana Value Added Tax Act. The Court disposed of the petitions by aligning its position with the well-established precedents set by the Jharkhand High Court, which had already been affirmed by the Supreme Court of India through dismissal of Special Leave Petitions.

This judgment carries substantial implications for assessees who availed ITC under the pre-GST VAT regime and are now facing show cause notices or demand proceedings under the current GST framework. The ruling reinforces the principle that the transitional boundary between legacy tax laws and the GST regime must be respected while initiating adjudication proceedings.

The central controversy before the Punjab and Haryana High Court revolved around a critical jurisdictional issue:

Can Revenue authorities invoke Section 73 and Section 74 of the CGST Act, 2017 / State GST Acts to initiate and adjudicate proceedings relating to credits availed under the pre-GST Haryana Value Added Tax legislation?

The petitioners — including Shiv Shakti Trading Co. — challenged such proceedings, arguing that the GST adjudication machinery under Section 73 and Section 74 was simply not the appropriate forum or legal mechanism for resolving disputes that had their origin in the VAT era.

Key Precedents Relied Upon

The Court's reasoning was anchored in two landmark decisions of the Jharkhand High Court, both of which had received the Supreme Court's implicit endorsement through dismissal of SLPs filed against them.

1. Usha Martin Limited Vs. Additional Commissioner, Central GST and Excise, Jamshedpur and others

Citation: [2024] 124 GSTR 396 (Jharkhand)

This Division Bench ruling of the Jharkhand High Court served as the foundational precedent. It directly addressed and conclusively settled the question of whether GST adjudication provisions could be applied to ITC disputes arising under the pre-GST VAT regime. The ruling held against such applicability and also extended certain liberty to the Revenue in paragraph 23 of the judgment, preserving their rights to pursue remedies under the appropriate legal framework.

Crucially, the Special Leave Petition filed against this judgment was dismissed by the Hon'ble Supreme Court, thereby lending it the highest judicial validation short of a direct Supreme Court ruling on merits.

2. Steel Authority of India Limited Vs. State of Jharkhand & ors.

Citation: 2025 SCC OnLine Jhar 436

A subsequent Bench of the Jharkhand High Court followed the ratio laid down in Usha Martin Limited in this matter involving Steel Authority of India Limited. This judgment further consolidated the legal position.