Facts of the Case

Mr. Goparaj Gopalakrishnan Pillai, aged 46, proprietor of M/s Taurus Communication and a registered dealer under the GST Act, 2017 bearing GSTIN 32ANPPP5159D1ZV, filed this writ petition before the High Court of Kerala at Ernakulam, impugning a show cause notice dated 26.08.2022 issued under Section 73(1) of the CGST/SGST Act for the financial year 2017-18, and the consequent assessment order dated 17.11.2022 disallowing input tax credit of Rs.19,830, along with interest of Rs.12,742 and penalty of Rs.20,000, aggregating a demand of Rs.52,572. The disallowance stemmed from a mismatch between ITC availed as per GSTR-3B and the credit reflected in GSTR-2A; the petitioner explained this as arising from a data-entry error in the GSTR-3B of December 2017, later self-corrected in the GSTR-3B of August 2018, and relied on the Assessing Officer's own reworking of eligible credit under Circular No.7/2021 dated 07.11.2021 issued by the Kerala SGST Commissioner.

Issues Involved

  1. Whether input tax credit can be denied to a recipient merely because the corresponding tax is not reflected in Form GSTR-2A, without independently verifying the recipient's evidence of the underlying transaction.
  2. Whether an assessment order under Section 73, based solely on a GSTR-2A versus GSTR-3B mismatch, is sustainable without giving the taxpayer an opportunity to substantiate the claim with documentary evidence.

Petitioner's Arguments

  • The alleged excess ITC arose from a bona fide data-entry error in the GSTR-3B for December 2017, where SGST of Rs.36,47,624.24 was wrongly entered instead of Rs.3,64,764.24, a difference the petitioner had already self-corrected in the GSTR-3B for August 2018.
  • The petitioner had not actually utilised the mismatched credit, and the residual disallowed amount of Rs.19,830 should not be sustained on the basis of a mechanical GSTR-2A/GSTR-3B comparison alone.
  • Relied on the Kerala High Court's own recent ruling in Diya Agencies v. State Tax Officer (WPC No.29769 of 2023, decided 12.09.2023), holding that ITC cannot be denied merely because the supplier's tax is not reflected in GSTR-2A, and that the recipient must be given an opportunity to prove the genuineness of the claim.

Respondent's Arguments

  • The Assessing Officer held that ITC is available only if the tax charged on the supply is actually remitted to the Government by the supplier; since the supplier had neither remitted the tax nor uploaded the supply details, the petitioner was not entitled to ITC on those supplies.
  • Applying Circular No.7/2021 dated 07.11.2021 issued by the Kerala SGST Commissioner, the officer nonetheless recomputed eligible ITC at Rs.65,61,906, leaving an ineligible/excess utilisation of Rs.19,830, which was confirmed in the assessment order.

Court Order/Findings

  • Following its own recent ruling in Diya Agencies v. State Tax Officer, the Court held that denial of input tax credit merely on the ground that the corresponding tax is not reflected in Form GSTR-2A is not sustainable without giving the assessee an opportunity to prove the genuineness of the claim through evidence.
  • The assessment order, insofar as it denied ITC of Rs.19,830, was set aside.
  • The matter was remitted to the Assessing Officer, who must give the petitioner one opportunity to produce evidence and documents in support of the ITC claim; if satisfied that the claim is bona fide and genuine, credit is to be granted.
  • The petitioner was directed to appear before the Assessing Officer within ten days with all supporting evidence, following which a fresh order was to be passed in accordance with law.

Important Clarification

  • A GSTR-2A versus GSTR-3B mismatch, by itself, is not sufficient ground to permanently deny input tax credit — the recipient must be given a genuine opportunity to establish the underlying transaction with evidence such as purchase records and payment proof before ITC is denied.
  • This decision follows and reinforces the Kerala High Court's ruling in Diya Agencies v. State Tax Officer (WPC No.29769/2023, decided 12.09.2023, 2023:KER:55318), which is emerging as the settled position within that jurisdiction on GSTR-mismatch denials under Section 73.
  • Taxpayers facing ITC denial purely on a GSTR-2A/GSTR-3B mismatch should seek remand for a fact-specific hearing rather than accept disallowance, citing this line of Kerala High Court precedent.

Sections Involved

  • Section 73, CGST/SGST Act, 2017 – determination of tax not paid, short paid, or input tax credit wrongly availed, for reasons other than fraud.
  • Section 16, CGST/SGST Act, 2017 – lays down the eligibility conditions for claiming input tax credit.
  • Circular No.7/2021 dated 07.11.2021 (Kerala SGST) – clarifies the computation of eligible ITC where a GSTR-2A/GSTR-3B mismatch exists.

Decision – In Favour of

In favour of the Assessee. The writ petition was allowed, the assessment order denying input tax credit was set aside, and the matter was remanded for a fresh opportunity to substantiate the ITC claim with evidence.

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. 29855 of 2023
  • CNR: Not available on record
  • Coram: Hon'ble Mr. Justice Dinesh Kumar Singh
  • Decision Date: 05.10.2023
  • Disposal Nature: Allowed; remanded to Assessing Officer

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