Facts of the Case

The petitioner, Geetha Agencies, a proprietorship represented by its proprietor Vasantha K.P. and registered under the SGST Act, filed a writ petition before the High Court of Kerala challenging Exhibit P1 assessment order and Exhibit P2 recovery notice issued by the Deputy Commissioner of State Tax, Kannur. The petitioner's Input Tax Credit of Rs.1,10,769/- (SGST + CGST) was denied on the ground of a mismatch between Form GSTR-2A and GSTR-3B. In reply to the show cause notice and subsequent GST DRC-01A, the petitioner had explained that certain suppliers, due to a technical glitch on the GST portal, had uploaded data in GSTR-1 as "0" tax items, even though the tax had in fact been collected from the petitioner. Unsatisfied with this explanation, the assessing authority issued a notice under Section 73 of the SGST Act, 2017 and passed Exhibit P1 order for Rs.3,61,304/-, comprising denied ITC of Rs.1,62,526/-, interest of Rs.1,78,778/-, and penalty of Rs.20,000/-, followed by Exhibit P2 revenue recovery notice.

Issues Involved

  1. Whether denial of Input Tax Credit solely on the ground of mismatch between Form GSTR-2A and Form GSTR-3B was sustainable where the supplier had, with delay, remitted the tax and it was ultimately reflected in GSTR-2A.
  2. Whether the petitioner should be granted an opportunity to substantiate its claim for input tax credit before the Assessing Authority with supporting documents.

Petitioner's Arguments

  • The supplier/dealer had remitted the tax collected from the petitioner for the inward supply, albeit with some delay.
  • There was ultimately no difference between the GSTR-3B, on the basis of which the petitioner claimed input tax credit, and the GSTR-2A, which reflected the tax paid by the supplier/dealer.
  • If given an opportunity, the petitioner would be able to prove that the input tax credit claimed was correct and duly reflected in GSTR-2A.
  • Reliance was placed on an earlier Kerala High Court judgment dated 12.09.2023 in W.P.(C) No.29769 of 2023, holding that denial of ITC merely on account of a GSTR-2A/GSTR-3B mismatch is impermissible where the assessee can prove actual payment of tax to the supplier.

Respondent's Arguments

  • The reply submitted by the petitioner/assessee in response to the show cause notice was not found convincing or satisfactory to drop the proceedings.
  • Accordingly, the demand under Section 73 of the SGST Act, along with interest and penalty, was confirmed by Exhibit P1, followed by the recovery notice at Exhibit P2.

Court Order/Findings

  • The Court accepted the petitioner's submission that the tax for which credit was claimed was, though with some delay, ultimately reflected in Form GSTR-2A, and observed that the denial of the claim in Exhibit P1 did not appear to be correct.
  • The Court held that the input tax credit claim required fresh examination and allowed the writ petition, setting aside both the Exhibit P1 assessment order and the Exhibit P2 recovery notice.
  • The petitioner was directed to appear before the Assessing Authority within seven days with all relevant documents; if satisfied that the claim was bona fide, the Assessing Authority was directed to grant the benefit and issue a revised order.
  • Liberty was thus reserved to the Department to re-examine and, if warranted, re-confirm the demand after considering the evidence produced by the petitioner.

Important Clarification

A mere mismatch between Form GSTR-2A and Form GSTR-3B is not, by itself, sufficient to deny input tax credit where the assessee can demonstrate, even with delayed reflection, that the supplier has in fact remitted the tax collected, which is ultimately captured in GSTR-2A; in such cases the assessing authority must examine the documentary evidence before confirming denial.

Sections Involved

  • Section 73 of the Kerala State Goods and Services Tax Act, 2017 – determination of tax not paid or short paid.
  • Form GSTR-2A and Form GSTR-3B under the CGST Rules, 2017 – return reconciliation mechanism.
  • Article 226 of the Constitution of India, 1950 – writ jurisdiction invoked by the petitioner.

Decision – In Favour of

The decision favours the Assessee. The assessment order and recovery notice were set aside and the matter remitted for fresh consideration, though the ultimate outcome remains conditional on the petitioner satisfying the Assessing Authority with documentary evidence within the stipulated time.

Related Case Laws

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

Case Details

  • Court: High Court of Kerala at Ernakulam
  • Case No.: WP(C) No.32070 of 2023
  • CNR: Not available
  • Coram: Justice Dinesh Kumar Singh
  • Decision Date: 03 October 2023
  • Disposal Nature: Writ petition allowed, assessment order and recovery notice set aside

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