Facts of the Case

The petitioner, M/S Santosh Kumar, was earlier registered under the pre-GST regime under the trade name M/s Akash Enterprises — holding TIN No.09278704481S under the VAT Act and registration No.ATIPK4398ND001 under the Service Tax Act. Upon migration to GST, due to an admitted error of the department, the petitioner was allotted two GSTINs instead of one: 09ATIPK4398N2ZR (migrated from the VAT registration) and 09ATIPK4398N1ZS (migrated from the Service Tax registration). The petitioner began business (e-charging vouchers for mobile phones, dealing with Reliance Industries Limited) using the first GSTIN, effective 1.7.2017. Since the portal showed this GSTIN as "not migrated," the ITC earned on it was instead claimed under the second GSTIN, 09ATIPK4398N1ZS. This triggered proceedings under Section 73 of the UP Goods and Services Tax Act, 2017 for AY 2018-19, resulting in an order dated 10.07.2020 denying the ITC, confirmed by the Additional Commissioner Grade-2 on 7.1.2022 in GST Appeal Nos.66 and 67 of 2020. The petitioner challenged this in two connected writ petitions, Writ Tax Nos.1185 and 1193 of 2022. During pendency, a beneficial Circular No. GST/2022-03/53 dated 2.1.2023 was issued, clarifying ITC mismatches from a supplier declaring the wrong recipient GSTIN in FORM GSTR-1.

Issues Involved

  1. Whether the benefit of a beneficial circular issued during the pendency of litigation, even at the appellate stage, can be denied to the assessee.
  2. Whether ITC could be legitimately denied where the dual-GSTIN situation arose from the department's own migration error rather than any default of the petitioner.
  3. Whether the matter warranted remand to the adjudicating authority for fresh consideration in light of Circular dated 2.1.2023.

Petitioner's Arguments

  • The allotment of two GSTINs for a single business was solely attributable to the fault of the respondent authorities during GST migration, and no lapse could be attributed to the petitioner.
  • Since the first GSTIN wrongly showed as "not migrated," the petitioner had no option but to claim ITC earned on it against the second GSTIN in GSTR-3B.
  • Circular dated 2.1.2023, Clause 3(d) read with para 4, squarely covers cases of a supplier declaring a wrong recipient GSTIN in GSTR-1, and prescribes verification of Section 16 conditions before denying credit.
  • Reliance was placed on the coordinate Division Bench decision in M/s Shree Krishna Traders v. State of U.P. (Writ Tax No.1106 of 2023), remanding an identical dispute on the same circular.
  • The matter deserved remand for fresh adjudication applying the circular.

Respondent's Arguments

  • The benefit of Circular dated 2.1.2023 could not be extended because the matter had already been adjudicated up to the first appellate stage before the circular was issued.
  • The writ petitions deserved dismissal on this ground.

Court Order/Findings

  • A benevolent circular issued during the pendency of litigation, including at the appellate or revisional stage, cannot be denied to the assessee, following the Supreme Court's ruling in Mathew M. Thomas v. Commissioner of Income Tax and this Court's own decision in Commissioner of Sales Tax v. S/s. Agrawal Rolling Mills.
  • Circular dated 2.1.2023 directly addresses the scenario of a supplier declaring a wrong recipient GSTIN in GSTR-1, and requires the proper officer to verify the Section 16 conditions — possession of tax invoice, actual receipt of goods/services, and payment to the supplier — before disallowing ITC.
  • Following the Division Bench precedent in Shree Krishna Traders on identical facts, the impugned appellate order dated 7.1.2022 was set aside.
  • The matters were remanded to the Additional Commissioner Grade-2 to pass fresh orders within one month from production of a certified copy, taking into account the Circular dated 2.1.2023 and other material relied upon by the petitioner.
  • Both writ petitions were allowed.

Important Clarification

Where an ITC mismatch results from a supplier wrongly quoting the recipient's GSTIN in GSTR-1 (rather than any default of the recipient), the case falls squarely within Circular dated 2.1.2023, and the proper officer must verify the underlying Section 16(2) conditions before denying credit. Crucially, such a beneficial circular applies even to matters already decided at the first appellate stage before its issue, provided the litigation remains pending.

Sections Involved

  • Section 73, UP Goods and Services Tax Act, 2017 — demand of tax not paid/short paid or ITC wrongly availed, in non-fraud cases.
  • Section 16, UPGST/CGST Act, 2017 — conditions for eligibility and availment of input tax credit.
  • Circular dated 2.1.2023 (GST/2022-03/53) — clarifies the procedure for reconciling ITC where GSTR-1 carries a wrong recipient GSTIN.

Decision – In Favour of

The decision favours the Assessee. While the Court did not finally adjudicate entitlement to ITC on merits, it set aside the confirmed demand and remanded the matter with a clear direction that the beneficial circular must be applied, effectively reopening the case on terms favourable to the petitioner.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Judicature at Allahabad
  • Case No.: Writ Tax No. 1185 of 2022 with Writ Tax No. 1193 of 2022
  • CNR: 2023:AHC:199009
  • Coram: Hon'ble Piyush Agrawal, J.
  • Decision Date: 11-10-2023
  • Disposal Nature: Allowed (per Circular dated 2.1.2023)

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