ITC Reflected in GSTR-2A higher than availed and Reflected in GSTR-3B: Madras HC sets aside GST Order against Larsen & Toubro [Read Order]

In a recent ruling, 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. The Petitioner, Larsen and Toubro ( L & T ) challenged an order in Original dated 30.12.2023, relating to the assessment period 2017-18, and the subsequent rejection of a rectification petition. The impugned order in original, issued on 30.12.2023, followed a series of communications, including an intimation and a subsequent Show Cause Notice ( SCN ). Despite the petitioner's response on 04.10.2023 addressing several issues raised, the order confirmed tax demands based on discrepancies between the petitioner's GSTR 3B and auto-populated GSTR 2A returns, imposition of cess, treatment of scrips, and corporate social responsibility obligations. During proceedings, counsel for the petitioner meticulously addressed each issue raised in the impugned order. Notably, discrepancies between GSTR 3B and GSTR 2A returns, imposition of cess despite prior payment, treatment of scrips, and taxation related to corporate social responsibility activities were contested. The absence of opportunity to present a case adequately on certain matters, particularly regarding the treatment of scrips, was emphasised, raising questions about the fairness of the assessment process. Respondent’s counsel Mr. C. Harsha Raj, Additional Government Pleader, acknowledged that several issues raised in the show cause notice were dropped after considering the petitioner's response. He submitted that the SCN pertains to about 26 issues. Upon consideration of the petitioner's reply, he submitted that about 21 issues were dropped. In these circumstances, he contended that interference is not warranted under Article 226 in respect of issues decided against the petitioner. 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. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

ITC Reflected in GSTR-2A higher than availed and Reflected in GSTR-3B: Madras HC sets aside GST Order against Larsen & Toubro [Read Order]

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ITC Reflected in GSTR-2A higher than availed and Reflected in GSTR-3B: Madras HC sets aside GST Order against Larsen & Toubro [Read Order]

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