Recovery proceedings under Section 73 or 74 of the TNGST Act are applicable when a refund claim is rejected specifically due to the ineligibility of input tax credit, as clarified by the Circular dated 18.11.2019.

ORDER

The writ petition is filed challenging the impugned order dated 26.12.2025, which is an order passed under Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017.

Heard Mr.S.Karunakar, learned counsel appearing for the petitioner and Mr.R.Suresh Kumar, learned Additional Government Pleader, who takes notice on behalf of the respondent.

The learned counsel appearing for the petitioner would submit that, on account of the available credit, the petitioner claimed the benefit of input tax and sought a refund of Rs.4,75,859/-, which was originally ordered. However, on appeal by the Revenue to the Appellate Authority, the same was reversed.

He would further submit that the petitioner has already decided to file a second appeal before the appropriate authority. While the appeal was being uploaded, even though the petitioner had already deposited the 10% amount, the appeal was not taken on file due to glitches in the portal. In the interregnum, the impugned order was passed under Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017.

It is the contention of the learned counsel for the petitioner that, firstly, in view of the circular dated 18.11.2019, and more specifically with reference to Class 22, an order under Sections 73 or 74 of the Act cannot be passed. In any event, this is not a case where the respondent can fix their claim under Section 74 of the Act and charge penalty and interest as per the same section.

Per contra, the learned Additional Government Pleader would submit that if the refund in this case has already been ordered and the petitioner has availed the refund, steps must be taken by passing the appropriate order under Section 73 or 74, as the case may be, to recover the liability from the petitioner.

He would further submit that, therefore, the authorities were justified in passing the impugned order.

I have considered the rival submissions made by either side and perused the material records of this case.

As far as the alleged violation of the circular dated 18.11.2019 is concerned, I am unable to accept the submission made by the learned counsel for the petitioner. Clauses 20 to 22 of the said circular are extracted below for ready reference:

20. In case of rejection of refund claim of unutilized/accumulated ITC due to ineligibility of the input tax credit under any provisions of the CGST Act and rules made thereunder, the proper officer shall have to issue a show cause notice in FORM GST RFD-08, under section 54 of the CGST Act , read with section 73 or 74 of the CGST Act , requiring the applicant to show cause as to why:

(a)the refund amount corresponding to the ineligible ITC should not be rejected as per the relevant provisions of the law; and

(b)the amount of ineligible ITC should not be recovered as wrongly availed ITC under section 73 or section 74 of the CGST Act , as the case may be, along with interest and penalty, if any.

21. The above notice shall be adjudicated following the principles of natural justice and an order shall be issued, in FORM GST RFD-06, under section 54 of the CGST Act , read with section 73 or section 74 of the CGST Act , as the case may be. If the adjudicating authority decides against the applicant in respect of both points (a) and (b) above, then FORM GST RFD-06 shall have to be issued accordingly, and the amount of ineligible ITC, along with interest and penalty, if any, shall be entered by the officer in the electronic liability register of the applicant through issuance of FORM GST DRC-07. Alternatively, the applicant can voluntarily pay this amount, along with interest and penalty, as applicable, before service of the demand notice, and intimate the same to the proper officer in FORM GST DRC-03 in accordance with sub-section (5) of section 73 or sub-section (5) of section 74 of the CGST Act , as the case may be, read with sub-rule (2) of rule 142 of the CGST Rules . In such cases, the need for serving a demand notice f