DRC 07 Amount Recovery through Credit Ledger-GST

Dear Members.

A demand is created through DRC 07, Against Mismatch of ITC (2017-18) in 2019, without issuing prior ASMT 10 or other Notice seeking clarification on mismatch of ITC. Taxpayer is unaware of DRC 07, in 2021 a fresh notice and phone call has received by Taxpayer regarding payment of Interest & Penalty, Mismatch ITC State tax Demand, setoff through Credit Ledger by State in Aug 2021.

my query is that :-

1. Is that Amount which is set off by State , recovered as no mismatch in that year end, only Due to Quarterly return filler filed their return in quarter end which create mismatch in month wise.

2. How can i go further for recovery that bona fide amount, as Appeal time is over.

Hey Aman,

Your situation about DRC-07 recovery through credit ledger due to ITC mismatch is a common challenge. Let me break down your queries and suggest possible steps:

1. About the Amount Set Off by State (Mismatch in ITC)

The demand created through DRC-07 without issuing prior ASMT-10 or notice seems improper, as natural justice requires prior show-cause or notice before demand.
The mismatch arises due to quarterly filing vs. monthly mismatch, so the demand might be based on technical mismatch rather than actual excess ITC taken.
If at year-end there was no genuine mismatch, then the demand is not sustainable.
Set-off via credit ledger by State tax authorities essentially means the department recovered the amount from your available credits without your consent, which can be disputed if unjustified.

2. How to Proceed if Appeal Time is Over

Since the appeal period is over, you have limited options but still some remedies:
- Revision Petition: Some states allow revision petitions beyond appeal period for bona fide mistakes or errors.
- Rectification under Section 161: You can request rectification if the demand is based on an error apparent from records.
- Representation to Commissioner: File a formal representation requesting review and refund of wrongfully recovered amount.
- Writ Petition: If all remedies are exhausted, approach the High Court via writ petition for violation of natural justice.
- GST Ombudsman: Approach the Ombudsman for grievance redressal if departmental process is not followed properly.

Additional Tips:

Collect all evidence of returns filed, ITC reconciliations, and communications to prove bona fide nature.
Track ITC ledger and credit ledger statements from GST portal.
If amount is wrongly recovered, demand refund by proper application.