Facts of the Case

The petitioner, Praveen Bhaskaran, proprietor of M/s Galaxy Traders, challenged an assessment order (Ext.P5) whereby Input Tax Credit of Rs.1,04,342/- (CGST of Rs.52,171/- and equal SGST) was denied. The denial was on the ground that the ITC claimed by the petitioner was not reflected in Form GSTR-2A, and the supplying dealer had not disclosed the corresponding outward supply in Form GSTR-1. The dispute traced back to a show cause notice under Form GST DRC-01 dated 26.02.2022, following an earlier notice in ASMT-10, culminating in an order under Section 73 read with Form DRC-07 dated 30.11.2022.

Issues Involved

  1. Whether the assessing authority can deny Input Tax Credit solely because it is not reflected in the recipient's GSTR-2A, without independently examining evidence of the underlying transaction and tax payment.
  2. What is the burden of proof on a taxpayer under Section 155 of the CGST Act where such a mismatch exists?

Petitioner's Arguments

  • The petitioner argued that mere non-reflection of the credit in GSTR-2A, due to the supplier's default in filing GSTR-1, should not be a ground to deny a bona fide claim of ITC where the recipient possesses evidence of the transaction and tax payment.

Respondent's Arguments

  • The State's position, as reflected in the impugned order, was that since the supplier had not disclosed the outward supply and the credit did not appear in GSTR-2A, the burden was on the petitioner to prove the claim, which the assessing authority found unproved on the record before it.

Court Order / Findings

  • The Court relied on its own decision in Diya Agencies v. State Tax Officer, which applied the Supreme Court's rulings in Union of India v. Bharti Airtel Ltd. [2022 (4) SCC 328] and State of Karnataka v. Ecom Gill Coffee Trading Pvt. Ltd. [2023 (3) TMI 533 SC], along with the Calcutta High Court's ruling in Suncraft Energy Pvt. Ltd.
  • The Court held that the assessing officer must independently examine the evidence produced by the assessee regarding an ITC claim; mere non-reflection of the credit in GSTR-2A is not, by itself, sufficient ground to deny the claim if the assessee's evidence otherwise establishes its bona fides.
  • Section 155 places the burden of proof on the person claiming ITC, requiring documentary evidence to substantiate that tax was in fact paid, but this evidence must be genuinely examined rather than the claim rejected mechanically on a portal mismatch.
  • The impugned order was set aside to the extent of the ITC denial, and the matter was remitted to the assessing authority to examine the petitioner's evidence and pass fresh orders in accordance with law, with the petitioner directed to appear within 15 days with all relevant documents.

Important Clarification

A mismatch between GSTR-2A and GSTR-3B, arising from the supplier's failure to properly report outward supplies, cannot by itself be a conclusive ground for the department to deny Input Tax Credit to the recipient. The assessing authority is duty-bound to independently examine documentary evidence produced by the claimant — invoices, proof of payment, and related records — before denying the credit, in line with the Supreme Court's guidance in Bharti Airtel and Ecom Gill Coffee.

Sections Involved

  • Section 155, CGST Act, 2017 — places the burden of proving eligibility for Input Tax Credit on the person claiming it.
  • Section 73, CGST Act, 2017 — governs determination of tax not paid or short-paid, or ITC wrongly availed, in cases not involving fraud.
  • Form GSTR-2A — the auto-populated statement of inward supplies based on suppliers' returns, used to cross-check ITC claims.
  • Form GST DRC-07 — the summary order communicating the final tax demand after adjudication.

Decision – In Favour of

The decision is in favour of the Assessee, with the assessment order set aside to the extent of the ITC denial and the matter remitted for a fresh, evidence-based decision.

Case Details

Court: High Court of Kerala at Ernakulam
Case No.: WP(C) No.30538 of 2023
Coram: Justice Dinesh Kumar Singh
Date of Order: 20.09.2023

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