Madras HC Quashes GST Assessment Against Tvl. Palepu Pharma Private Limited — Fresh Adjudication Ordered on 50% Pre-Deposit, Duplicate ITC Demand Gets Relief
Case Overview
Case: Tvl. Palepu Pharma Private Limited Vs State Tax Officer
Court: Madras High Court
Assessment Year: 2019–2020
Impugned Order Date: 23.08.2024
The Madras High Court recently intervened in a GST dispute where a pharmaceutical company challenged an assessment order that confirmed a substantial tax demand covering tax, interest, and penalty. The Court found merit in the assessee's contentions, quashed the impugned order, and directed a fresh adjudication subject to a conditional pre-deposit requirement. The case also presented an interesting scenario involving a duplicate ITC demand that had already been resolved through appellate proceedings, warranting specific relief from the Court.
Background of the Dispute
The Original Demand Confirmed Under the Impugned Order
The assessment order dated 23.08.2024 for the Assessment Year 2019–2020 confirmed the following consolidated demand against the assessee:
| S.No. | Issue | SGST | CGST | IGST | CESS | Total |
|---|---|---|---|---|---|---|
| 1 | Total tax due (Under declaration of output tax) + (Excess claim of ITC) | 7,92,030 | 7,92,031 | 6,03,615 | 0 | 21,87,676 |
| 2 | Interest | 6,61,269 | 6,61,270 | 5,03,961 | 0 | 18,26,500 |
| 3 | Penalty on amount in S.No.1 | 79,203 | 79,203 | 60,362 | 0 | 2,18,768 |
| Total | 15,32,502 | 15,32,504 | 11,67,938 | 0 | 42,32,944 |
The aggregate demand confirmed under this order stood at ₹42,32,944, encompassing tax liability, interest, and penalty components.
Key Issues Raised Before the Court
Issue 1: Duplicate ITC Demand Already Addressed in Collateral Proceedings
A significant portion of the total demand — specifically ₹3,97,983 — was attributable to an alleged excess claim of Input Tax Credit (ITC). The assessee's counsel brought to the Court's attention that this very ITC issue had also been the subject of a separate assessment order dated 19.12.2024, which was initiated for the same tax period.
In those collateral proceedings, the assessment authority had confirmed the ITC-related demand under Defect No. I, calling upon the assessee to pay the following amounts:
"It was therefore they were requested to pay the above amount tune of Rs.3,44,516/- IGST, Rs.26,734/- as CGST, Rs.26,734/- as SGST along with Penalty and interest and interest under Section 50(1) of the TNGST/CGST Act 2017."
The assessee challenged this assessment order before the Appellate Authority. By an order dated 16.12.2025, the Appellate Authority allowed the appeal and dropped the demand relating to this ITC defect. The relevant extract of the appellate order reads as follows:
"6) As per the circular no.193/15/2023 dated 17.07.2023, the disputed ITC under IGST, CGST & SGST, was below 10% of the eligible claim of ITC reflected in GSTR-2A at Rs.1,00,24,653/- under IGST, and Rs.17,92,32,179/- each under SGST & CGST covered by the requisite certificates. Hence the appellant was eligible to claim the disputed ITC of Rs.3,44,516/- under IGST and Rs.26,734/- each under CGST & SGST, as per the circular no.193/15/2023 dated 17.07.2023 as rightly argued by the authorised representative, since the disputed ITC were covered by the required certificates obtained from the concerned suppliers and the same was found to be admissible and consequently the appeal was allowed."