Facts of the Case

The petitioner, Raju Joseph, proprietor of Future Graphic Systems, Alappuzha, a registered dealer under the CGST and SGST Acts, filed a writ petition before the High Court of Kerala impugning Exhibit P5 and P5(a) orders dated 14.06.2023 and 16.06.2023, passed in Form GST DRC-07 by the Assistant State Tax Officer. The dispute concerned alleged excess availment of Input Tax Credit for the tax period 2017-18, based on the difference between Form GSTR-3B and GSTR-2A. Proceedings had originated with a show cause notice in Form GST ASMT-10 dated 23.08.2020, followed by the petitioner's reply, a further notice in Form GST DRC-01 dated 02.09.2021, the petitioner's reply in DRC-06, and culminated in the impugned assessment orders under challenge.

Issues Involved

  1. Whether denial of input tax credit for FY 2017-18 solely on account of a GSTR-2A/GSTR-3B mismatch was sustainable in light of CBIC Circular No.183/15/2022-GST dated 27.12.2022.
  2. Whether the matter warranted remand to the Assessing Authority for reconsideration in accordance with the procedure prescribed in the Circular and Section 16 of the CGST Act.

Petitioner's Arguments

  • CBIC Circular No.183/15/2022-GST dated 27.12.2022 clarifies the procedure to be followed where ITC availed in GSTR-3B is not reflected in GSTR-2A due to bona fide errors by the supplier, including verification of conditions under Section 16(2) of the CGST Act and, where necessary, a Chartered Accountant/Cost Accountant certificate.
  • Reliance was placed on the Kerala High Court's judgment in Diya Agencies v. State of Kerala (W.P.(C) No.29769 of 2023, dated 12.09.2023), holding that ITC denial merely because tax is not reflected in GSTR-2A is not sustainable if the assessee proves the claim through other evidence.
  • The impugned orders ought to be set aside and the matter remanded for reconsideration applying the Circular and Section 16 conditions.

Respondent's Arguments

  • The impugned Exhibit P5 and P5(a) orders had assessed the petitioner on the ground of excess ITC availed based on the mismatch between GSTR-3B and GSTR-2A for the tax period 2017-18.
  • The record does not indicate any substantive opposition by the State's counsel to the applicability of Circular No.183/15/2022-GST once it was placed before the Court.

Court Order/Findings

  • The Court examined paragraphs 4 and 5 of CBIC Circular No.183/15/2022-GST, which prescribe the procedure for verifying ITC claims not reflected in GSTR-2A, including certification requirements depending on whether the discrepancy exceeds or is within Rs.5 lakh per supplier.
  • Considering the Circular and the precedent in Diya Agencies, the Court allowed the writ petition, set aside Exhibit P5 and P5(a) orders, and remitted the matter to the Assessing Authority to reconsider the ITC claim irrespective of the GSTR-2A entries.
  • The petitioner was directed to deposit 10% of the assessed amount within fifteen days and appear before the Assessing Authority with all documents; if the claim was found unjustified, the balance amount would remain payable.
  • The petitioner was directed to appear before the Assessing Authority on 30.11.2023, with the 10% deposit remaining subject to the final decision on merits.

Important Clarification

Following CBIC Circular No.183/15/2022-GST, denial of input tax credit for FY 2017-18 and 2018-19 merely because the credit is not reflected in Form GSTR-2A is not automatically sustainable; the assessing authority must verify the conditions under Section 16(2) of the CGST Act and, where applicable, accept CA/CMA or supplier certification before confirming denial, and remand for such reconsideration is the appropriate remedy.

Sections Involved

  • Section 16 of the CGST Act, 2017 – eligibility and conditions for taking input tax credit.
  • CBIC Circular No.183/15/2022-GST dated 27.12.2022 – clarification on ITC verification for GSTR-2A/GSTR-3B mismatches for FY 2017-18 and 2018-19.
  • Form GST DRC-07 under the CGST Rules, 2017 – summary of the order confirming demand.

Decision – In Favour of

The decision favours the Assessee. The impugned assessment orders were set aside and the matter remanded for reconsideration applying Circular No.183/15/2022-GST, though the petitioner remains obligated to satisfy the Assessing Authority on merits and to pay the deficient amount if the claim is ultimately found unjustified.

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.22478 of 2023
  • CNR: Not available
  • Coram: Justice Dinesh Kumar Singh
  • Decision Date: 31 October 2023
  • Disposal Nature: Writ petition allowed, orders set aside and remanded

Link to Download the Order

Download the full judgment (PDF)

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.