Facts of the Case

The Petitioner, M/s Sakthi Timber and Plywoods, Kuthuparamba, Kannur, challenged an assessment order (Ext.P1) and a consequent revenue recovery notice (Ext.P2) before the High Court of Kerala. The Petitioner's input tax credit of Rs. 1,10,769/- (SGST plus CGST) for FY 2017-18 was denied on the ground of a mismatch between GSTR-2A and GSTR-3B. In response to the show cause notice, the Petitioner had explained that the credit was claimed on the basis of valid invoices, and that certain suppliers, due to a technical glitch on the GST portal, had uploaded their GSTR-1 data reflecting "0" tax items. The reply was not found satisfactory, and a notice under Section 73 of the State Goods and Services Tax Act, 2017 was issued, culminating in Ext.P1 order dated 20.09.2022 raising a total demand of Rs. 2,18,832/-, comprising the denied ITC of Rs. 1,10,770/-, interest of Rs. 88,062/-, and a penalty of Rs. 20,000/-. A revenue recovery notice dated 29.07.2023 followed.

Issues Involved

  1. Whether input tax credit can be denied solely on the ground of a mismatch between GSTR-2A and GSTR-3B, where the taxpayer claims the tax was in fact paid to the supplier.
  2. Whether the Petitioner ought to be granted a further opportunity to substantiate the claim with supporting documents before the assessing authority.

Petitioner's Arguments

  • The supplier had remitted the tax collected from the Petitioner, albeit with some delay, and there was no real difference between the GSTR-3B (basis of the ITC claim) and the GSTR-2A (reflecting the supplier's remittance).
  • If afforded an opportunity, the Petitioner would demonstrate that the ITC claimed was correctly reflected in GSTR-2A.
  • Reliance was placed on the Kerala High Court's ruling dated 12.09.2023 in W.P.(C) No.29769 of 2023, holding that ITC denial merely for a GSTR-2A/GSTR-3B mismatch is incorrect where the assessee can prove actual payment of tax to the supplier.
  • This was not a case of non-payment of tax by the supplier; the tax had in fact been collected and was reflected, albeit belatedly, in Form GSTR-2A.

Respondent's Arguments

  • The Petitioner's reply to the show cause notice was not found convincing or satisfactory to drop the proceedings, warranting issuance of Form GST DRC-01A and, subsequently, the Section 73 notice and Ext.P1 assessment order.

Court Order/Findings

  • The Court accepted, on the Petitioner's own showing, that the tax for which ITC was claimed was in fact reflected in Form GSTR-2A, albeit with delay, and observed that the denial in Ext.P1 did not appear to be correct on this basis.
  • The Court held that the assessment order and recovery notice ought to be set aside and one opportunity granted to the Petitioner to appear before the Assessing Authority with all relevant documents; if the authority is satisfied that the ITC claim is bona fide, the benefit should be granted and a revised order issued.
  • The writ petition was allowed, and Ext.P1 assessment order and Ext.P2 recovery notice were set aside, with the Petitioner directed to appear within seven days with supporting documents.

Important Clarification

Denial of input tax credit merely because of a mismatch between GSTR-2A and GSTR-3B is not automatically sustainable; where the taxpayer can demonstrate, through supporting documents, that the tax was genuinely paid to the supplier and reflects in GSTR-2A (even if belatedly uploaded), the assessing authority must examine the claim on merits rather than deny it on the mismatch alone.

Sections Involved

  • Section 73 of the Kerala State Goods and Services Tax Act, 2017 — determination of tax not paid/short-paid, or ITC wrongly availed, without fraud.
  • GSTR-2A and GSTR-3B under the CGST Rules, 2017 — returns relevant to input tax credit reconciliation.

Decision – In Favour of

The decision favours the Assessee, with the assessment order and recovery notice set aside. That said, the relief is conditional — the Petitioner must still substantiate the ITC claim before the Assessing Authority, which retains discretion to issue a revised order based on the documents produced.

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. 30949 of 2023
  • CNR: Not available
  • Coram: Hon'ble Mr. Justice Dinesh Kumar Singh
  • Decision Date: 3 October 2023
  • Disposal Nature: Writ allowed; assessment order and recovery notice set aside, opportunity granted

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.