Input Tax Credit can't be denied for declaration of wrong GSTIN without giving relief as per Circular No. 183

The Calcutta High Court has ruled that Input Tax Credit (ITC) cannot be denied solely due to a mismatch in GSTIN declarations without considering relief as per Circular No. 183. The court directed the Revenue Department to rehear an appeal, stating that the department should have investigated the mismatch using available evidence and considered the circular's clarifications. This ruling ensures that taxpayers are not unfairly penalised for errors like incorrect GSTIN reporting by suppliers.

The Hon'ble Calcutta High Court in M/s. Makhan Lal Sarkar and anrs. vs. the Assistant Commissioner of Revenue, State Tax B.I. and Ors. [WPA/2146/2023 dated September 18, 2023] directed the Revenue Department to hear the appeal afresh as the benefit of Input Tax Credit ("ITC") was denied due to a mismatch of ITC claimed in Form GSTR-3B and that reflected in Form GSTR-2A in accordance with Circular No. 183/15/2022-GST dated December 27, 2022.

Facts

M/s. Makhan Lal Sarkar ("the Petitioner") is a registered partnership firm engaged in the business of Bidi Leaves. During the Financial Year 2017-2018, the Petitioner purchased Bidi leaves from numerous suppliers.  In January 2021, a physical inspection was conducted at the premises of the Petitioner. Thereafter, the proceeding under Section 73 of the Central Goods and Service Tax Act, 2017 ("the CGST Act") was initiated against the Petitioner. A show cause notice ("the SCN") dated August 04, 2021 was served on to the Petitioner. The Petitioner's claim for the benefit of ITC was rejected and was directed to pay penalty along with interest under Section 73 of the CGST Act vide order dated June 07, 2022 ("the Adjudicating Order"). 

Aggrieved by theAdjudicating Order, the Petitioner preferred an appeal, but the Petitioner did not appear despite numerous opportunities granted by the Revenue Department ("the Respondent"). The Respondent vide order dated June 28, 2023 ("the Impugned Order"), dismissed the appeal and upheld the order passed by the adjudicating authority under Section 73 of the CGST Act due to a mismatch of ITC claimed in Form GSTR-3B and that reflected in Form GSTR-2A. 
Aggrieved by the Impugned Order, the Petitioner filed the writ petition challenging the Impugned Order. 

Issue

Whether the denial of an ITC mismatch claim in GSTR-3B and GSTR-2A be justified when the conditions outlined in Circular No. 183/15/2022-GST are not taken into account?

Held

The Hon'ble Calcutta High Court in WPA/2146/2023, held as under:

• Observed that, the Petitioner's contention of a breach of the Principal of Natural Justice can be upheld, as the Petitioner, despite being granted several opportunities, voluntarily opts not to appear before the Respondent, thereby compelling the Respondent to proceed with an ex-parte decree.
• Held that, the Impugned Order is unsustainable because it imposes an obligation on the Respondent to ascertain the mismatch from the documentary evidences available and should have taken into consideration the clarification specified under the Circular pertaining to the respondent's approach in cases where the supplier had wrongly reported the said supply under B2C instead of B2B in Form GSTR-1, resulting in the omission of the relevant supply or in cases where an incorrect GSTIN of the recipient was declared in Form GSTR-1.
• Directed that, the Petitioner to deposit 20% of the disputed tax amount, in addition to the amount already remitted under Section 107(6) of the CGST Act.
• Further directed that, the Respondent to afford a fresh opportunity to the Petitioner for presenting the appeal. 

Our Comments

This judgment is partially correct. It is important to note that in FY 2017-18, the presence of ITC in GSTR-2A was not a mandatory prerequisite for claiming. This aspect was clarified through a Press Release issued on October 18, 2018. Additionally, the Hon'ble Supreme Court in the case of Union of India v. Bharti Airtel[Civil Appeal No. 6520 of 2021 dated October 28, 2021], held that GSTR-2A serves as a facilitator, and the recipient is required to avail ITC based on self-assessment. Notably, the conditions related to the reflection of ITC in GSTR-2A/GSTR-2B were initially introduced in October 2019 through Rule 36(4) of the CGST Rules and later in January 2022 through the incorporation of Section 16(2)(aa) in the CGST Act.