Demand should not be raised when negative taxable and invoice value arise due to erroneous reporting of Credit Notes

The Madras High Court has ruled that tax authorities should not raise demands when a negative taxable and invoice value arises due to the erroneous reporting of credit notes as Input Tax Credit (ITC). In this case, the petitioner incorrectly reported credit notes, leading to a negative value. The court found that the authorities failed to consider the petitioner's explanation and the lack of actual revenue loss to the government. Consequently, the assessment order was set aside and returned for reconsideration.

The Hon'ble Madras High Court in the case of Oasys Cybernetics Private Limited v. State Tax Officer [W.P. No. 9624 of 2024 dated April 12, 2024] disposed of the writ petition by setting aside the assessment order in case where the total taxable and invoice value was in negative due to erroneous reporting of Credit Notes as Input Tax Credit ("ITC"), thereby holding that, the demand should not be raised when there is no loss caused to the government in the aforesaid scenario.

Facts

Oasys Cybernetics Private Limited ("the Petitioner") is engaged in the business of supplying and installing point of sale machines in ration shops operated by Tamil Nadu Civil Supplies Corporation by integrating the same with a central server. The Petitioner received show cause notice dated September 14, 2023 ("the SCN") relating to discrepancy between the Petitioner GSTR 3B and auto-populated GSTR 2A for which reply was filed by the Petitioner. However, the assessment order dated December 29, 2023 ("the Impugned Order") was issued against the Petitioner by the Revenue Department ("the Respondent").

Aggrieved by the Impugned Order, the Petitioner filed a writ petition before the Hon'ble Madras High Court contending that, the credit notes were not reflected under the 9B heading of Form GSTR-1 and instead reflected in heading relating to B2C transactions because of which the credit notes were erroneously reported in ITC and there was no revenue impact. Also, CA Certificate filed by the Petitioner in compliance with the GST circular was not taken into consideration by the Respondent.

Issue

Whether Demand should be raised when negative taxable and invoice value arise due to erroneous reporting of Credit Notes?

Held

The Hon'ble Madras High Court in the case of W.P. No. 9624 of 2024 held as under:

• Noted that, as per the GSTR-1 statement placed on record by the Petitioner, in the heading relating to B2C total invoice value was in negative for which reply was filed by the Petitioner stating that the credit notes were erroneously reported as ITC.
• Opined that, the explanation provided by the Petitioner was not taken into consideration as to the tallying of the amount reflected as ITC with the value of the Credit note so as to check whether there is excess availment of ITC.
• Further opined that, the required exercise not carried out and tax demand has been raised solely on the ground that, the credit notes have not been duly reported in GSTR-1 or in the auto populated GSTR-2A, therefore, the Impugned Order calls for interference.
• Held that, the Impugned Order is set aside and matter is remitted back for reconsideration. 

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