What Was the Case About?
Infiniti Retail Limited, known for its brand Croma, recently challenged a huge tax demand before the Delhi High Court. The ITC Dispute demand came from the CGST Delhi West Commissionerate, which issued an order on 3rd February 2025, claiming over ₹108 crore under various sections of the CGST Act.
What Did the Tax Department Claim?
The order included:
- ₹91.59 crore for wrongly claimed Input Tax Credit (ITC)
- ₹16.80 crore as short-paid GST
- Additional interest and penalties under Sections 50, 122, and 74(1)
In total, the authorities raised a demand of more than ₹108 crore.
How Did Croma Respond?
Croma’s legal team, led by Senior Advocate Mr. Prakash Shah, argued that the authorities had:
- Relied too much on the Show Cause Notice (SCN)
- Ignored the detailed reply and documents submitted by Croma
- Disregarded a previous court order from September 2024, which required the adjudicating officer to review the case independently and not rely on audit findings alone
What Did the Earlier Court Order Say?
In 2024, the Delhi High Court had clearly instructed:
- The officer should not rely on the audit memo
- A fair and fresh evaluation of Croma’s reply should be made
- Croma had the right to submit additional evidence
Despite these directions, the final order mostly repeated the audit points and SCN, with little analysis of Croma’s reply.
The Core Dispute: CGST/SGST vs IGST ITC
The most important issue was how Croma had claimed ITC.
Here’s what happened:
- Croma claimed CGST and SGST on invoices issued by vendors outside Delhi
- However, for inter-state transactions, IGST should have been claimed
- As per Section 16(2)(b) of the CGST Act, the place of supply must match the type of tax claimed
So, while ITC eligibility was not questioned, its classification was. This led to a demand of ₹77.36 crore for FY 2017–2021.
What Did the Delhi High Court Decide?
The court agreed that the adjudicating authority failed to fully comply with its earlier directions. Yet, it chose not to send the matter back. Instead, it stated:
- Croma should file an appeal under Section 107 of the CGST Act
- The 10% pre-deposit requirement for filing an appeal was waived only for the ₹77.36 crore ITC issue, since ITC was clearly eligible
- The Appellate Authority will now decide whether the rest of the demand is justified
Summary of the Court’s Directions
- Croma must file an appeal within six weeks
- No need to pay pre-deposit for ₹77.36 crore ITC
- The appeal should cover other amounts with statutory deposit
- The Appellate Authority must evaluate all facts independently
Lessons for Businesses and Finance Teams
1. Get ITC classification right
Misclassifying CGST/SGST vs IGST can trigger massive disputes.
2. Audit reports are not final
Authorities must apply independent judgment. Courts expect this too.
3. Strong replies matter
Respond to SCNs with proper records. A clear reply can protect you later.
4. Use writ petitions wisely
Writs are not meant for factual arguments. Follow the legal appeal process.
5. Pre-deposit relief is possible
If your claim is strong and well-supported, courts may waive the deposit.
Final Words
The Croma GST dispute shows how procedural gaps and technical errors can lead to major tax liabilities. It also highlights the need for strong documentation and legal preparation.
Businesses must stay alert to ITC rules and ensure their compliance teams are audit-ready at all times.
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Published on: June 24, 2025