Whalesbook
Deepak Nitrite Limited announced on March 31, 2026, that its subsidiary, Deepak Phenolics Limited (DPL), received an order from the Commissioner (Appeal), CGST & Central Excise, Vadodara, dated March 6, 2026. The appellate ruling upholds a demand for ₹2,15,34,798 in ineligible Input Tax Credit (ITC) and imposes a matching penalty of ₹2,15,34,798, bringing the total to ₹4,30,69,596.
DPL has stated that it availed the credit in accordance with the law and anticipates no material financial impact beyond the amount specified in the order. The company plans to contest the ruling by filing an appeal.
Tax Dispute Details
The order pertains to ineligible Input Tax Credit (ITC) claimed by DPL for the Financial Year 2019-20. While DPL maintains its position on the legality of the credit, the appellate authority's confirmation of the demand and penalty highlights the ongoing tax dispute.
Subsidiary's Business Context
Deepak Phenolics Limited is a significant producer of chemicals such as Phenol, Acetone, and Isopropyl Alcohol (IPA) in India, contributing to domestic supply and import substitution. This GST order follows a previous ₹60.46 lakh GST demand for FY2019-20 that DPL also received in March 2026. The company also underwent search operations by the Income Tax Department in FY2019.
Next Steps and Potential Outcome
Deepak Phenolics Limited is pursuing an appeal against the Commissioner (Appeal)'s order. The primary risk for the company is the potential failure of this appeal. Should it be unsuccessful, DPL would be liable to pay the full ₹4.30 crore, comprising the ITC recovery and the penalty.
Industry Landscape
Deepak Nitrite operates in India's competitive chemical sector, alongside peers like Aarti Industries, Vinati Organics, Atul Ltd, and Tata Chemicals. While these companies navigate various operational and regulatory environments, DPL's situation highlights a specific compliance challenge related to GST. Investors will be tracking the outcome of DPL's appeal.