GST Case Digest on Rejection of ITC Claims based on GSTR-2A vs GSTR-3B Mismatch

GSTR-3B is a summary return that taxpayers need to file monthly. It includes a summary of outward supplies, Input Tax Credit claimed, tax liability, and taxes paid. GSTR-2A is an auto-populated read-only return that reflects the details of inward supplies (purchases) of goods and services. The mismatch between GSTR-3B and GSTR-2A occurs when the taxpayer's ITC claimed in GSTR-3B does not match the details available in GSTR-2A. This could happen for a variety of reasons, including supplier filing delays, technical issues, or data entry errors. GST Consultant fails to inform GST Proceedings w.r.t. GSTR 3B vs 2A Disparity: Madras HC mandates 10% Pre-deposit for Remand Rishab Industries vs The Assistant Commissioner (ST) CITATION: 2024 TAXSCAN (HC) 1000 The Madras High Court mandated a 10% pre-deposit for the reconsideration of a case where the petitioner was unaware of Goods and Services Tax ( GST ) proceedings due to the failure of their GST consultant to inform them about the disparity between GSTR-3B and GSTR-2A. A Single bench of Justice Senthilkumar Ramamoorthy observed that the tax liability arises from the mismatch between the petitioner’s GSTR 3B returns and the auto-populated GSTR 2A. Furthermore, the tax demand was confirmed due to the petitioner’s failure to respond or appear for the personal hearing. Despite this, the court deems it just and necessary to grant the petitioner an opportunity to contest the tax demand on its merits. Consequently, the matter is remanded for reconsideration. This remand is subject to the condition that the petitioner remits 10% of the disputed tax demand within two weeks and submits a reply to the show cause notice within the same period. The high court directed the respondents 1 & 2 are directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and issue a fresh order within three months. ITC availed Reversed due to GSTR 3B returns and GSTR 2A Discrepancy : Madras HC orders 10% Pre-deposit for Reconsideration Rishab Industries vs The Assistant Commissioner (ST) CITATION: 2024 TAXSCAN (HC) 1000 The Madras High Court ordered reconsideration of the issue of Input Tax Credit ( ITC ) under Goods and Services Tax ( GST ) reversed due to the discrepancy in GSTR 3B returns and GSTR 2A. The order was set aside on condition of 10% pre-deposit. A single bench of Justice Senthilkumar Ramamoorthy noted that the ITC availed by the petitioner was reversed due to the disparity between their GSTR 3B returns and the auto-populated GSTR 2A. However, considering the minimal discrepancy and the petitioner’s willingness to contest, the court deemed it just and necessary to grant the petitioner an opportunity to contest the tax demand on its merits. Consequently, the impugned order dated 15.09.2023 was set aside, and the matter was remanded for reconsideration. The petitioner was directed to remit 10% of the disputed tax demand within two weeks, along with submitting a reply to the show cause notice within the same period. Upon receipt of the petitioner’s reply and satisfaction of the remittance condition, the 1st respondent – The Assistant Commissioner (ST) was instructed to provide a reasonable opportunity to the petitioner, including a personal hearing, and issue a fresh order within three months. Taxpayers Must Regularly Monitor GST Portal; Unawareness as Justification Not Convincing: Madras HC Tvl. Gayatri Granites Represented by its Partner VS The Assistant Commissioner CITATION: 2024 TAXSCAN (HC) 990 The Madras High Court, while remanding the matter on 10% Pre-deposit condition, observed that the taxpayers must regularly monitor the Goods and Services Tax ( GST ) portal. A Single bench of Justice Senthilkumar Ramamoothy observed that “As a registered person under applicable GST enactments, the petitioner is under an obligation to monitor the GST portal on an ongoing basis. Therefore, the explanation provided by the petitioner is not entirely convincing.” The petitioner’s counsel submitted that the confirmed tax proposal pertains to the mismatch between the petitioner’s GSTR 3B returns and the auto populated GSTR 2A. If provided an opportunity to contest the tax demand on merits, he submitted that the petitioner would be in a position to explain the discrepancy. On instructions, the counsel submitted that the petitioner agrees to remit 10% of the disputed tax demand as a condition for remand. Mrs. K.Vasanthamala, Government Advocate submitted that the petitioner was provided sufficient opportunities in the form of a notice in Form ASMT 10, an intimation and a show cause notice. She also pointed out that a personal hearing was offered on 30.06.2023. The bench emphasised that as a registered entity under the relevant GST regulations, the petitioner bears the responsibility of regularly monitoring the GST portal. Consequently, the explanation furnished by the petitioner was deemed insufficient. The tax demand was primarily confirmed due to the petitioner’s failure to respond to the show cause notice and participate in the personal hearing. Accordingly the writ petition was disposed of setting aside the order and the matter is remanded for reconsideration, subject to the condition that the petitioner remits 10% of the disputed tax demand as agreed to within a maximum period of two weeks from the date of receipt of a copy of this order. ITC availed Details in GSTR 2A reconciled with GSTR 3B: Madras HC directs GST Dept to dispose of Rectification Petition within 1 Month Roshan Fruits India Pvt. Ltd vs Assistant Commissioner (ST) CITATION: 2024 TAXSCAN (HC) 957 The Madras High Court directed the Goods and Services Tax (GST) department to dispose of the Rectification Petition within 1 Month as the petitioner correctly submitted the reconciled GSTR 2A and GSTR 3B. The plea arised from an assessment order dated September 16, 2023, which was issued concerning the alleged wrongful availment of Input Tax Credit (ITC). The petitioner filed the rectification petition highlighting that there is no discrepancy and that the ITC claimed in GSTR 3B returns is accurately reflected in the auto-populated GSTR 2A. However, the disposal of this petition has been pending, prompting the petitioner to seek its swift resolution. A Single bench of Justice Senthilkumar Ramamoorthy disposed of the writ petition by instructing the respondent to consider and dispose of the rectification petition dated March 12, 2024, through a comprehensive order. The respondent has been directed to provide a reasonable opportunity, including a personal hearing, to the petitioner within 1 month. Unaware of GST Proceedings on GSTR 3B vs 2A Disparity as Notices Uploaded in Additional Notices and Orders Tab: Madras HC directs 10% Pre-deposit Tvl. KGK Construction vs The Deputy State Tax Officer CITATION: 2024 TAXSCAN (HC) 949 The Madras High Court directed the 10% pre-deposit condition for challenging the order where the petitioner lacked Goods and Services Tax ( GST ) proceedings on discrepancy between GSTR 3B and GSTR 2A as notices uploaded in Additional Notices and Orders Tab of GST portal. The court recognized the gravity of the situation, emphasising the necessity of affording the petitioner an opportunity to contest the tax demand. It was noted that the tax proposal was confirmed due to the petitioner’s failure to respond to the show cause notice. Thus, a single bench of Justice Senthilkumar Ramamoorthy set aside the order dated 11.10.2023 and remanded the matter for reconsideration. The remand was conditional upon the petitioner remitting 10% of the disputed tax demand within two weeks from the receipt of the court’s order. The petitioner was granted the opportunity to submit a reply to the show cause notice within the specified period. Additionally, the respondent was directed to provide a reasonable opportunity, including a personal hearing, and issue a fresh order within three months from the receipt of the petitioner’s reply. Accordingly, the writ petition was disposed of. Failure to Consider Certificate from Supplier: Madras HC quashes ITC Mismatch Demand AP Studio Enterprises vs The Assistant Commissioner (ST)(FAC) CITATION: 2024 TAXSCAN (HC) 900 The Madras High Court quashed the ITC ( Input tax credit ) mismatch demand on failure to consider certificates from the supplier. An order dated 29.12.2023 is challenged in this writ petition. The petitioner received a show cause notice dated 29.09.2023. The said show cause notice was replied to on 16.10.2023 by stating that the reason for discrepancy between the GSTR 3B return of the petitioner and the auto-populated GSTR 2A was the belated filing of GSTR 1 by the supplier in respect of one invoice. The petitioner states that he was unable to upload the reply on the portal. The order impugned herein was issued in the said facts and circumstances. A Single Bench of Justice Senthilkumar Ramamoorthy observed that “Therefore, the order dated 29.12.2023 is set aside and the matter is remanded to the respondent for reconsideration. The petitioner is permitted to submit a reply to the show cause notice within 15 days from the date of receipt of a copy of this order by enclosing all relevant documents. Upon receipt thereof, the respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within two months from the date of receipt of the petitioner’s reply.” Adjudication of Discrepancies in GSTR 3B vs GSTR 2A ignoring Supplier and CA Certificates with Invoice Details: Madras High Court quashes GST Demand Order AP Studio Enterprises vs The Assistant Commissioner CITATION: 2024 TAXSCAN (HC) 875 The Madras High Court sets aside the Goods and Services Tax ( GST ) order as Certificates from Supplier and CA providing invoice details leading to Disparity in GSTR 3B & GSTR 2A not Considered by the authorities. The petitioner presented additional evidence, including a certificate from Fivestar Impex India Private Limited dated 31.10.2023 and a certificate from Prabhakaran & Associates, Chartered Accountant, detailing an invoice dated 01.11.2017. These documents were not considered while issuing the impugned order, warranting judicial intervention. Consequently, a Single bench of Justice Senthilkumar Ramamoorthy set aside the order dated 29.12.2023 and remanded the matter to the respondent for reconsideration. The petitioner was granted 15 days to submit a reply to the show cause notice, enclosing all relevant documents. Upon receipt, the respondent was directed to provide the petitioner with a reasonable opportunity for a personal hearing and subsequently issue a fresh order within two months. CBIC Circular’s Procedure dealing GSTR 3B & 2A Disparity not applied: Madras HC allows to Contest Demand on 10% Pre-deposit M/s.Sri Lakshmi Silvers vs The State Tax Officer CITATION: 2024 TAXSCAN (HC) 810 The Madras High Court, quashing the order, allowed the taxpayer to contest the demand on 10% Pre-deposit condition. The court considered the allegation of petitioner claiming the procedure in the Central Board of Indirect Taxes and Customs ( CBIC ) dealing with the discrepancies in GSTR-3B and 2A were not applied in the matter. The court, while putting the petitioner on notice, deemed it appropriate to grant an opportunity to contest the tax demand. The impugned assessment order is thus quashed on the condition that the petitioner remits 10% of the disputed tax demand within two weeks of receiving a copy of the order. Additionally, the petitioner is permitted to file a reply to the show cause notice within the same period. Upon receipt of the reply and satisfaction of the remittance, the assessing officer is directed to provide a reasonable opportunity, including a personal hearing, and issue a fresh assessment order within two months. GSTR 2A vs. GSTR3B Mismatch Cross Verification Plea ends up in Expeditious Disposal Order by Kerala HC ADWAITH MOTORS vs STATE TAX OFFICER CITATION: 2024 TAXSCAN (HC) 775 In a significant legal development at the High Court of Kerala, a plea seeking cross-verification of GSTR 2A and GSTR3B mismatches has culminated in an expeditious disposal order for the Goods and Services Tax ( GST ) matter. The case was brought about by a company with headquarters located in Kaduthuruthy, Kottayam. The petitioner’s arguments were particularly focused on discrepancies between GSTR 2A (a purchase-related tax return) and GSTR3B (a summary return). Such disparities often lead to complexities in tax credit calculations and compliance. After careful deliberation and arguments, the petitioner narrowed down their prayer, focusing on the expeditious disposal of the rectification application (Ext.P2) by the 1st respondent, the State Tax Officer. Justice Dinesh Kumar Singh delivered a judgment directing the 1st respondent to consider and pass appropriate orders on Ext.P2 application expeditiously, preferably within two months. This directive from the High Court provides a structured approach to addressing discrepancies in GST filings, especially regarding GSTR 2A and 3B. ITC Reflected in GSTR-2A higher than availed and Reflected in GSTR-3B: Madras HC sets aside GST Order against Larsen & Toubro Larsen & Toubro Limited vs The Assistant Commissioner (ST)(FAC) CITATION: 2024 TAXSCAN (HC) 757 The Madras High Court granted relief to Larsen & Toubro by overturning the Goods and Services Tax ( GST ) order and remanding the matter for reconsideration. Allegations arose regarding higher Input Tax Credit ( ITC ) reflected in the Goods and Services Tax Returns ( GSTR-2A ) compared to what was availed and reflected in GSTR-3B. A Single bench of Justice Senthilkumar Ramamoorthy observed that out of the total tax liability, approximately Rs. 5.17 crores, arises from discrepancies between the GSTR 3B and GSTR 2A returns. In addition, it was evident from the intimation issued on 31.05.2023, where the amount reflected in the auto-populated GSTR 2A return exceeded the ITC availed of and reported in the petitioner’s GSTR 3B returns. Given these circumstances, the imposition of GST on the surplus amount reflected in the GSTR 2A return appears prima facie unsustainable. As regards the issue relating to cess, the court observed that the petitioner has stated clearly that cess was paid in May 2018 by enclosing the relevant GSTR 3B return. In spite of that, the impugned order imposed liability with regard to cess. Similarly, concerning the liability imposed regarding scrips, the SCN required the petitioner to justify why the ITC should not be reversed for duty credit scrips. However, the impugned order treated the amount as turnover from scrips without affording the petitioner the chance to explain, rendering the findings on this matter unsustainable. Upon careful consideration of the arguments and evidence presented, the High Court found the impugned order dated 30.12.2023 unsustainable, particularly regarding the issues forming the subject of the writ petitions. Consequently, the court set aside the order and remanded the matter to the respondent for reconsideration. Recognizing the petitioner’s right to be heard on all issues, the court granted a two-week window for the petitioner to file a reply, directing the respondent to provide a reasonable opportunity for a personal hearing and issue a fresh order within two months. The High Court disposed of the writ petitions. Disparity in GSTR-3B and GSTR 2A/2B due to ITC claimed in Respect of Customs Duty: Madras HC quashes GST Order with Condition M/s.Subh Sri Agencies vs The Deputy State Tax Officer CITATION: 2024 TAXSCAN (HC) 715 The Madras High Court quashed the Goods and Services Tax ( GST ) Assessment order demanding tax liability stating discrepancy found in GSTR-3B and GSTR 2A/2B with a condition directing the petitioner to remit 10% of disputed tax liability. The bench of Justice Senthilkumar Ramamoorthy observed that the impugned order had disregarded the petitioner’s explanation due to alleged lack of relevant documents. However, recognizing the need for fairness, the court quashed the order on the condition that the petitioner remit 10% of the disputed tax demand within two weeks. Additionally, the petitioner was granted the opportunity to submit necessary documents related to the ITC claim. Upon receipt and verification of these documents, the respondent was directed to provide a reasonable opportunity for the petitioner to be heard, followed by the issuance of a fresh order within two months. Wrong Indication of GSTIN: Madras HC quashes Denial of GST Input Tax Credit for GSTR-3B GSTR-2A Mismatch Tvl.Hansraj and Company vs The Assistant Commissioner, (ST) CITATION: 2024 TAXSCAN (HC) 580 A Single Bench of the Madras High Court quashed the Goods and Services Tax ( GST ) assessment order where the petitioner was disallowed from claiming the Input Tax Credit for wrongly mentioning the Goods and Services Tax Identification Number ( GSTIN ) inadvertently. The petitioner is a registered person under applicable GST laws. He received a GST show cause notice dated 27.01.2023 alleging that he had made an excess claim of ITC and that this was evident on comparing his GSTR-3B return with the GSTR-2A return. The Bench noted that, “The documents on record, such as invoice dated 20.09.2017 and the GSTR return of Kirthi Enterprises, prima facie indicate that the GSTIN of Premier Corporation was wrongly mentioned by Kirthi Enterprises in the return. If that is indeed the case, the petitioner would be unjustly deprived of ITC. In order to provide the petitioner with an opportunity to redress this grievance, interference with the impugned order is called for.” It was thus held that, “the impugned order dated 25.08.2023 is quashed and the matter is remanded to the assessing officer.” The assessing officer was directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh assessment order within a period of two months thereafter. ITC Claimed cannot be denied due to mismatch between GSTR-2A and GSTR-3B: Kerala HC Sets aside Order against Philips Auto Agencies M/S. PHILIPS AUTO AGENCIES (INDIA) PVT. LTD vs STATE TAX OFFICER CITATION: 2024 TAXSCAN (HC) 572 The Kerala High Court set aside the order denying the claim of Input Tax Credit ( ITC ) by Philips Auto Agencies due to a mismatch between GSTR-2A and GSTR-3B. The court directed the first respondent to consider the claim of the petitioner keeping in mind in terms of the Circular dated 27.12.2022 and after affording an opportunity of hearing to the petitioner. Justice Gopinath P viewed that the claim of the petitioner can be directed to be reconsidered by the Assessing Authority also having regard to the provisions of the Circular dated 27.12.2022 referred to above. If the petitioner requests a statement in terms of the provisions contained in Section 73(3) of the Goods and Services Tax Act, the same should also be provided to him. The court disposed of the writ petition by setting aside the order of assessment of the petitioner for the year 2018-19 and remitting the matter for a fresh consideration of the first respondent. The first respondent shall consider the claim of the petitioner as directed above also keeping in mind in terms of the Circular dated 27.12.2022 and after affording an opportunity of hearing to the petitioner. The petitioner shall appear before the first respondent at 11.00 a.m. on 20.03.2024 and thereafter, the matter shall be reconsidered as directed above. GSTR-2A vs GSTR-3B vs GSTR-9: Madras HC quashes Rejection of GST ITC claim solely on non-inclusion in GSTR-3B M/s.Sri Shanmuga Hardwares Electricals vs The State Tax Officer CITATION: 2024 TAXSCAN (HC) 423 A Single Bench of the Madras High Court has quashed the rejection of a Goods and Services Tax ( GST ) Input Tax Credit ( ITC ) claim based solely on non-inclusion of the same in GST Return – GSTR-3B. By asserting that nil returns were erroneously and inadvertently filed in the GSTR-3B returns, the petitioner stated that he is eligible for Input Tax Credit ( ITC ) in each of the above mentioned assessment periods and that this is duly reflected in the GSTR-2A returns. The Single Bench of the Madras High Court observed that, “When the registered person asserts that he is eligible for ITC by referring to GSTR-2A and GSTR-9 returns, the assessing officer should examine whether the ITC claim is valid by examining all relevant documents, including by calling upon the registered person to provide such documents. In this case, it appears that the claim was rejected entirely on the ground that the GSTR-3B returns did not reflect the ITC claim. Therefore, interference is warranted with the orders impugned herein.” It was thus held that, “the orders impugned herein are quashed and these matters are remanded for reconsideration. The petitioner is permitted to place all documents pertaining to its ITC claims before the assessing officer within a maximum period of two weeks from the date of receipt of a copy of this order.” Further, the Single Bench of Senthilkumar Ramamoorthy added that, “Upon receipt thereof, the respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue fresh assessment orders..” Issue on Submission of GSTR -1 based on CBDT Circular: Kerala HC Remands matter for Re Adjudication KOCHI MEDICALS vs STATE TAX OFFICER CITATION: 2024 TAXSCAN (HC) 300 The Kerala High Court remanded the matter for readjudication on the issue of the Submission of GSTR -1 based on the Central Board of Direct Taxes ( CBDT ) Circular. A notice in Form GST ASMT – 10 dated 08.07.2020 was issued to the petitioner regarding his claim for an input tax credit on supplies he received from the supplier/dealer. The ground for issuing the said notice was that there was a mismatch in GSTR – 3B filed by the petitioner and GSTR – 2A for the input tax credit he claimed. The assessing authority on the ground of mismatch between GSTR – 3B filed by the petitioner and GSTR – 2A disallowed the input tax credit paid by the petitioner to the extent of the mismatch. Aggrieved by the said order, the petitioner had filed an appeal. However, the same came to be dismissed by the impugned order. The court of Justice Dinesh Kumar Singh set aside the impugned orders in and remanded the matter back to the assessing authority to consider the case of the petitioner afresh in the light of the Circular No. 183/15/2022-GST dated 27.12.2022. Bombay HC allows Dealer to Amend GSTR-1 for FY 2018-19 to enable Mahindra & Mahindra to Claim Input Tax Credit M/s. Railroad Logistics (India) Pvt. Ltd vs The Union of India & Ors CITATION: 2024 TAXSCAN (HC) 285 A Division Bench of the Bombay High Court has granted the liberty to a dealer to amend the Goods and Services Tax ( GST ) Return – GSTR-1 to enable its client, Mahindra & Mahindra to claim Input Tax Credit ( ITC ). On 10 November 2020, Mahindra & Mahindra ( Orissa ) received intimation in form DRC-01A on the ground of ‘MISMATCH IN GSTR-2A AND GSTR-3B for the financial year 2018-19.’ On 18 December 2020, the petitioner filed a letter to the GST Authorities, apprising them of the situation, with a request to allow the petitioner to amend its form GSTR-1 for the financial year 2018-19. Thereafter, on 28 December 2020, Mahindra & Mahindra ( Orissa ) also received a show cause notice along with form DRC-01. In the wake of such notices being issued to the petitioner’s customers, the petitioner, on 16 January 2021, filed a reminder letter to the GST Authorities to look into the matter. However, no action was taken. In these circumstances, the petitioner approached the Court for the prayers as noted. The contention, as urged on behalf of the petitioner, was that in the absence of enabling matching provision as prescribed in Section 42 and 43 of the CGST Act Rule 2017, the petitioner needed to be allowed to amend its form GSTR-1 for the financial year 2018-19. The Division Bench of the Bombay High Court observed that the GST regime, as contemplated under the GST Law, unlike the prior regime, has evolved a scheme which is largely based on the electronic domain. The Court further observed that the situation, like in the present case, was also the situation in the proceedings before different High Courts, wherein the errors of the assessee were inadvertent and bona fide. The Court held that any incorrect particulars on the varied aspects touching the GST returns would have serious cascading effects, prejudicial not only to the assessee but also to third parties. The Bench of Justice G S Kulkarni and Justice Firdosh P Pooniwalla thus directed the respondents to permit the petitioner to amend and rectify form GSTR-1 for the period in question for financial year 2018-19, either through online or manual means, within a period of four weeks. Supreme Court upholds Calcutta HC Verdict granting GST ITC in-spite of GSTR 2A – 3B Mismatch to Purchaser except in Exceptional Cases THE ASSISTANT COMMISSIONER OF STATE TAX vs SUNCRAFT ENERGY PRIVATE LIMITED & ORS. CITATION: 2023 TAXSCAN (SC) 335 A Two-Judge Bench of the Supreme Court has upheld the Calcutta High Court judgment, rejecting the department’s appeal against the Calcutta High Court decision in Suncraft Energy Private Limited Case, which had held that Input Tax Credit (ITC) of the purchasing dealer cannot be denied by the department solely based on the supplying dealer’s non-remittance of tax. The High Court of Calcutta has held that the Buyers who comply with the conditions contemplated under Section 16(2) of the Central Goods and Services Tax (CGST) Act and State Goods and Services Tax (SGST) Act, 2017 are eligible to avail Input Tax Credit (ITC) and are not liable for the mismatch or discrepancies in the Goods and Services Tax Return (GSTR) 2A and GSTR 3B due to the default of the seller. It was also held that the recovery procedures initiated by the proper officer shall be directed against the seller and not the buyer. The Bench of Supreme Court Justices B V Nagarathna and Justice Ujjal Bhuyan rightly upheld the right of the buyers, who shall not be prejudiced and punished for the mistake of sellers. In short, the Supreme Court dismissal of the department’s appeal against the Calcutta High Court order brings relief to honest and compliant taxpayers, and no Input Tax Credit can be reversed from buyer for non-payment of tax by seller, quoting the inconsistency in GSTR-2A and GSTR-3B. Denial of Legitimate ITC Solely based on GSTR 2A & 3B difference, Kerala HC directs Assessing Authority to reconsider Petitioner’s Contentions relying on GST Circular No.183 RAJU JOSEPH vs BY ADVS CITATION: 2023 TAXSCAN (HC) 1731 The High Court of Kerala has directed the Assessing Authority to reconsider the contentions of the petitioner relying on Circular No.183/15/2022-GST dated 27.12.2022 issued by the Government of India, Department of Revenue on the observation that the petitioner was denied the legitimate Input Tax Credit (ITC) solely based on the difference in the ITC depicted in the Goods and Services Tax (GST) Returns GSTR 2A & GSTR 3B. The decision came in response to the Writ Petition filed by Mr. Raju Joseph, proprietor of Future Graphic Systems, Alappuzha, challenging the validity of the orders issued by the State Goods and Services Tax (SGST) Department. The Kerala High Court, in compliance with the Circular, allowed the writ petition, setting aside the orders passed by the Assessing Authority. The bench remitted the matter back to the Assessing Authority, directing a re-evaluation of the petitioner’s case irrespective of the discrepancies in Form GSTR 2A. The petitioner was directed to deposit 10% of the assessed amount within fifteen days and appear before the Assessing Authority with all relevant documents so as to substantiate the claim of ITC. The single bench of Justice Dinesh Kumar Singh concluded that the legitimate claims of ITC shall not be denied solely based on differences between GSTR-2A and GSTR-3B, provided they have complied with all the necessary conditions for availing ITC as contemplated under Section 16 of the CGST Act, 2017. Refund of Unutilised ITC due to Inverted Duty Structure Denied Based on Misclassified Supplier Invoices & Excess ITC Claims; Delhi HC Remands Matter SIMRAN CHANDWANI vs PRINCIPAL COMMISSIONER OF CGST, DELHI NORTH AND ORS. CITATION: 2023 TAXSCAN (HC) 1721 The High Court of Delhi has remanded a matter involving the denial of the refund of unutilised Input Tax Credit (ITC) due to an inverted duty structure based on the issue of misclassified supplier invoices and excess ITC claims. The issue revolves around the mismatch in the ITC as reflected in GSTR 2A, a report that is automatically generated from supplier returns and the ITC claimed by the petitioner in her GST returns (GSTR 3B). The matter was further complicated by two primary issues, such as the misclassification of goods by one of the suppliers and the petitioner’s claims of excess ITC for certain months. The bench found that the rejection of the refund claim by the authorities lacked sufficient justification and was based on mere suspicion. The bench emphasised that the correct tax rate was charged by the supplier for the PVC straps and their classification discrepancy should not be the basis for denying the petitioner the accumulated ITC. The bench also questioned the reasoning used by the Appellate Authority, which had denied the entire refund claim due to the issue with just one supplier, despite the fact that other suppliers had correctly classified their products and the GST rates had been charged appropriately. Tax for which ITC is claimed Reflected in Form GSTR 2A: Kerala HC quashes Assessment Order GEETHA AGENCIES vs DEPUTY COMMISSIONER OF STATE TAX CITATION:2023 TAXSCAN (HC) 1526 The Kerala High Court quashed the assessment order on reflection of tax for which Input Tax Credit (ITC) was claimed in the Form GSTR2A. The instant writ petition has been filed impugning the assessment order and recovery notice. The petitioner’s input tax credit for an amount of Rs.1,10769/- (SGST + CGST), has been denied on the ground that there is mismatch in GSTR 2A and GSTR 3B. A Single Judge Bench of Justice Dinesh Kumar Singh observed that “Considering the said aspect of the matter that as per the stand of the petitioner/assessee, the tax for which the petitioner claimed input tax credit is reflected in Form GSTR 2A, though with some delay, the claim of the petitioner for input tax credit which has been denied in the assessment order does not appear to be correct.” Transaction has to be Proven Beyond Reasonable Doubt to Claim ITC u/s 70 of KVAT Act: Supreme Court State of Karnataka vs Ecom Gill Coffee Trading Private Limited CITATION: 2023 TAXSCAN (SC) 133 The Supreme Court of India has clarified that under Section 70 of the Karnataka Value Added Tax Act, 2003, dealers who claim Input Tax Credit ( ITC ) on their purchases must provide evidence of actual physical movement of goods and prove the genuineness of the transaction. The dealer must furnish the name and address of the selling dealer, details of the vehicle that delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, Tax Invoices, payment particulars, and other relevant information to establish the same. The Supreme Court clarified that Section 70 of the Karnataka Value Added Tax Act, 2003, places the burden of proving that a transaction is not taxable or the correctness of the ITC claim on the dealer, and this burden cannot be shifted to revenue authorities. The dealer must prove beyond reasonable doubt that the transaction occurred, and merely producing invoices or payment receipts is insufficient. In addition to tax invoices and payment particulars, the dealer must provide information such as the name and address of the selling dealer, details of the vehicle that delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, and other relevant information. ITC Cannot Be Denied Solely Based on GSTR 2A and 3B Discrepancy: Kerala HC Remits Matter Back for Evidence Examination MINA BAZAR RAILWAY STATION ROAD vs STATE TAX OFFICER CITATION: 2023 TAXSCAN (HC) 1405 The Kerala High Court ruled that Input Tax Credit (ITC) cannot be denied solely based on the discrepancy between GSTR 2A and GSTR 3B. The High Court remitted the matter back for the evidence examination. The bench of Dinesh Kumar Singh relied on the decision pronounced by the same court in the case of Diya Agencies v. The State Tax Officer has held that the “input tax credit of the assessee under the GST regime cannot be denied merely on the difference of GSTR 2A and 3B.” “Merely on the ground that in Form GSTR-2A the said tax is not reflected should not be a sufficient ground to deny the assessee the claim of the input tax credit” stated the Kerala High Court in the Diya Agencies v. The State Tax Officer. The High Court, while allowing the writ petition, remitted the matter back to the file of the Assessing Authority to examine the evidence of the petitioner irrespective of the Form GSTR 2A for petitioner’s claim of the input tax credit. Furthermore, it was instructed that, subsequent to a thorough review of the evidence presented by the petitioner/assessee, the Assessing Authority should issue new orders in compliance with applicable regulations. ITC Cannot Be Denied Based Solely on GSTR 2A and GSTR 3B Discrepancies: Kerala HC directs Readjudication M/S HENNA MEDICALS BUS STAND ROAD vs STATE TAX OFFICER SECOND CIRCLE CITATION: 2023 TAXSCAN (HC) 1391 The Kerala High Court, based on the Calcutta High Court’s ruling in the case of Suncraft Energy Private Limited v. The Assistant Commissioner, State Tax, Ballygunge Charge, has ruled that, in the GST regime, the assessee cannot be refused the Input Tax Credit simply due to variations between GSTR 2A and GSTR 3B. Relying on the judgment of the Supreme Court in the case of The State of Karnataka v. M/s Ecom Gill Coffee Trading Private Limited, the bench of Justice Dinesh Kumar Singh allowed the writ petition and remitted back to the file of the Assessing Authority/1st respondent to examine the evidence of the petitioner irrespective of the Form GSTR 2A for the petitioner’s claim for the input tax credit. Further, directed that the Assessing Authority to issue new orders in compliance with the applicable regulations after examining the submissions. The petitioner is also instructed to attend a meeting with the Assessing Officer on October 3, 2023, at 11:00 a.m., and should bring all supporting evidence for their input tax credit claim. Buyer Complying with Sec 16(2) Conditions Eligible for ITC & Not Liable for GSTR 2A and 3B Mismatch on Seller’s Default, Recovery Targeted at Seller and Not Buyer: Calcutta HC UNCRAFT ENERGY PRIVATE LIMITED AND ANOTHER vs THE ASSISTANT COMMISSIONER CITATION: 2023 TAXSCAN (HC) 1206 The High Court of Calcutta has held that the Buyers who comply with the conditions contemplated under Section 16(2) of the Central Goods and Services Tax (CGST) Act and State Goods and Services Tax (SGST) Act, 2017 are eligible to avail Input Tax Credit (ITC) and are not liable for the mismatch or discrepancies in the Goods and Services Tax Return (GSTR) 2A and GSTR 3B due to the default of the seller. It was also held that the recovery procedures initiated by the proper officer shall be directed against the seller and not the buyer. The bench observed that Section 16(2) of the State Goods and Services Tax Act outlines the conditions for a dealer to be eligible for ITC. The conditions include possession of a valid tax invoice, receipt of goods or services, payment of tax to the government, and furnishing of returns under Section 39 of the State Goods and Services Tax Act. The appellant contended that they had satisfied all these conditions and hence, their claim of ITC is legitimate and valid. The bench highlighted the press releases issued by the Central Board of Indirect Tax and Customs (CBIC), which clarified that GSTR 2A was meant for taxpayer facilitation and did not impact the ability of the taxpayer to avail ITC on a self assessment basis. The bench also clarified that there would be no automatic reversal of ITC from the buyer on non-payment of tax by the seller. Recovery of tax from the seller was the primary recourse and only exceptional situations, such as collusion between the buyer and seller or the seller’s closure without adequate assets, could warrant action against the buyer. The bench directed the proper officer to first proceed against the seller and only under exceptional circumstances, as clarified by the CBIC, could proceedings be initiated against the appellant. This judgment brings relief to the buyers who had complied with the conditions laid down under Section 16(2) of the Central Goods and Services Tax Act and clarifies that they cannot be held liable for discrepancies arising due to the default of the seller. The bench also emphasised the importance of conducting proper inquiries and investigations against the defaulting sellers and following due process before demanding reversal of ITC from the buyers. In result, the appeal is allowed and the orders passed in the writ petition and the order passed by the Assistant Commissioner of State Tax are set aside with a direction to first proceed against the seller before any proceedings can be initiated against the appellant. Demand Notice on Receipt of Service due to Mismatch in GSTR 2A and GSTR 3B ITC is not Valid in Absence of Investigation at End of Supplier: Calcutta HC SUNCRAFT ENERGY PRIVATE LIMITED vs THE ASSISTANT COMMISSIONER CITATION: 2023 TAXSCAN (HC) 1197 The Calcutta High Court held that the demand notice on receipt of service due to mismatch in Goods and Service Tax Return (GSTR) 2A and Goods and Service Tax Return (GSTR) 3B Income Tax Credit (ITC) is not valid in absence of investigation at the end of supplier. The Court comprising Chief Justice T S Sivagnanam and Justice Hiranmay Bhattacharyya has relied on the judgment of the Supreme Court in Bharti Airtel as well as Arise India Ltd and held that “issuance of demand notice on recipient of service on account of mismatch in GSTR 2A and GSTR 3B ITC cannot be sustained without any investigation being done at the end of the supplier whose Invocies are not reflecting in GSTR 2A and that allegation of non payment of tax by supplier and denial of ITC under section 16(2)(c) of the Act cannot be made without any investigation of the supplier in question.” Levy of Penalty of 100% of GST Dues in Form GST DRC-07 Invalid: Jharkhand HC quashes SCN and Demand Order Vikash Kumar Singh vs Commissioner of State Tax CITATION: 2023 TAXSCAN (HC) 620 The Jharkhand High Court has recently quashed the Show Cause Notice ( SCN ) and Demand Order against the assessee as infructuous for the demand of penalty of 100% of Goods and Services Tax ( GST ) dues in the Form GST DRC-07. The proceedings, resultant Show Cause Notice, Summary of Show Cause Notice and Demand Order were issued against the petitioner on the basis of an alleged mismatch in the GST returns GSTR-3B and GSTR-2A for the relevant period. The Division Bench of Justice Aparesh Kumar Singh and Justice Deepak Roshan observed that “Levy of the penalty of 100% of tax dues reflected in the Summary of the Order contained in Form GST DRC-07 vide Annexure-4 in the respective writ petitions are also in the teeth of the provisions of Section 73(9) of the Act of 2017, wherein while passing an adjudication order, the Proper Officer can levy penalty up to 10% of tax dues only. The above infirmity clearly shows non-application of mind on the part of the Deputy Commissioner, State Tax, Godda Circle, Godda.” It was further observed that the proceedings also suffer from a violation of principles of natural justice and the procedure prescribed under section 73 of the Goods and Services Tax Act. GST ITC Denial to Buyer on ground of Default by Seller: Delhi HC to Hear a bunch of Petitions Together BHARTI TELEMEDIA LTD vs UNION OF INDIA & ORS CITATION: 2023 TAXSCAN (HC) 534 The Delhi High Court is set to hear a bunch of petitions together on the ground of Goods and Service Tax (GST) Input Tax Credit (ITC) Denial to Buyer on ground of Default by Seller. The petitioners have challenged the vires of Section 16(2)(c) of the Central Goods and Services Tax Act, 2017. In situations where suppliers have failed to file returns or remit tax on specific supplies, Input Tax Credit (ITC) already obtained by the respective buyers on the said supplies is reversed. Assessment orders are being made by the appropriate officers authorised under the GST Acts based on portal scrutiny. The mismatch between GSTR 2A and GSTR 3B is used to finish assessments levying tax (reversal of alleged ineligible ITC), interest, and penalty. In response, writ applications contesting the constitutionality of Section 16(2)(c) along with Section 16(4) of CGST Act, 2017 are flooding High Courts across the nation. Relevant extract from Section 16(2)(c) “(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless, –– (c) subject to the provisions of section 41 or section 43A, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply.” Amended Section 16(4) provides that, “A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after November 13 following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier”. The Court determined that the outcome of this petition will have bearing on other batch petitions challenging provisions qua availment of input tax credit including Rule 36(4) of CGST Rules (unamended) and therefore, opines that, “in the first instance”, it could decide the petitions pending in case of Bharti Telemedia and Bharti Airtel and “depending on their outcome, decision be taken in the remaining matters” The Bench observed that embargo placed under Section 16 (2)(c), qua availment of ITC is akin to condition placed under Section 9(2) (g) of Delhi Value Tax Act, 2004, which was read down to the extent of bona fide purchases in the case of Quest Merchandising India Private Limited vs. Government of NCT of Delhi and affirmed by Supreme Court. The Court listed the matter along with the other pending batch of petitions for hearing on April 19 and the matter is being heard by Justice Rajiv Shakdher and Justice Tara Vitasta Ganju. Karnataka HC allows changes in GSTR-3B for the months of July 2017 and March 2018 M/S ORIENT TRADERS vs DEPUTY COMMISSIONER OF COMMERCIAL TAXES CITATION: 2023 TAXSCAN (HC) 291 The High Court (HC) of Karnataka, permits assessee to make necessary changes to GSTR 3- B for the months of July 2017 and March 2018 since it would not cause any prejudice to Revenue. The error committed by the petitioner was of entering the figures in the wrong column resulted in a mismatch between the GSTR-3B and GSTR2A forms, due to which, the 1st respondent-DCCT observed in its audit report that the ITC which had accrued to the Petitioner was liable to be disallowed. A single member Justice S R Krishna Kumar held that the petitioner is entitled to the limited relief of being permitted to make the necessary changes to its GSTR 3-B returns for the months of July 2017 and March 2018, particularly, since doing so would not cause any prejudice to the respondents-Revenue. Major Relief to BALCO: Chhattisgarh HC stays Order denying ITC due to mis-match in Form GSTR-3B with details in Form GSTR-2A M/s. Bharat Aluminium Company limited vs Union of India and others CITATION: 2021 TAXSCAN (HC) 330 In a major relief to the Bharat Aluminium Company Ltd. (BALCO), the Chhattisgarh High Court stayed order denying Input Tax Credit (ITC) due to mis-match in Form GSTR-3B with details in Form GSTR-2A. The assessee, BALCO was denied ITC on the basis of matching of Input tax credit availed in Form GSTR-3B with the details furnished by suppliers in Form GSTR-2A for the period 2018-19. The single judge bench of Justice Gautam Bhaduri while listing the matter in the week commencing August 02, 2021, granted stay on recovery and restrains Revenue to take coercive steps on assessee depositing 5% of demand within 15 days. GST Council Update ITC in case of Mismatch in GSTR 3B and GSTR-2A: GST Council Clarifies The Union Finance Minister Nirmala Sitaraman presided over the 50th meeting of the GST Council on 11th July 2023 at Vigyan Bhawan in New Delhi including Revenue Secretary, CBIC chairman. The GST council has clarified about the Input Tax Credit claim in case of mismatch in GSTR-3B and GSTR-2A. As per the recommendations of the Council in its 48th meeting, Circular No. 183/15/2022-GST dated 27th December, 2022 was issued to provide for the procedure for verification of input tax credit in cases involving difference in Input Tax Credit availed in FORM GSTR-3B vis a vis that available as per FORM GSTR-2A during FY 2017-18 and 2018-19. To provide further relief to the taxpayers, the Council recommended for further issuance of a circular to provide for similar procedure for verification of input tax credit in cases involving difference in Input Tax Credit availed in FORM GSTR-3B vis a vis that available as per FORM GSTR-2A during the period 01.04.2019 to 31.12.2021 The Department has given notices regarding the discrepancy between the ITC claimed in GSTR-3B and the ITC reflected in Form GSTR-2A that was discovered by the GST officer during various stages of the proceeding, including scrutiny, GST audit, investigation, etc. This ITC discrepancy is regarded as ineligible ITC obtained by the registered person, and the officer has requested an explanation. In most situations, the ITC has been reversed along with interest and penalty. It has been clarified by the GST council. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates