Facts of the Case

The petitioner, M/S Shree Krishna Traders, challenged proceedings initiated under Section 74 of the U.P. GST/CGST Act pursuant to a notice dated 24.12.2022 for the financial year 2017-18 (tax period July 2017 to March 2018), and the consequent order dated 26.07.2023. The petitioner relied on a circular dated 02.01.2023 dealing with input tax credit availed through GSTR-3B where the supplier had filed GSTR-1 and GSTR-3B but had declared the supply against a wrongly mentioned GSTIN of the recipient in GSTR-1; paragraph 3(d) of the circular sets out how such mismatches between the credit claimed in GSTR-3B and that reflected in GSTR-2A are to be handled, including the jurisdictional tax authority of the correctly-identified registrant being separately intimated to disallow the credit if claimed there. The petitioner contended that although the impugned order referred to the circular, its benefit was not actually extended to it.

Issues Involved

  1. Whether the impugned Section 74 order, having referred to the CBIC circular dated 02.01.2023 on wrongly mentioned recipient GSTIN in GSTR-1, was liable to be set aside for not actually applying its procedure and benefit to the petitioner.

Petitioner's Arguments

  • The authority was required to follow the procedure laid down in paragraph 4 of the circular dated 02.01.2023 before denying credit on account of a GSTIN mismatch traceable to the supplier's own error.
  • Although the impugned order mentioned the circular, its benefit was not extended to the petitioner, and the matter ought to be remitted for a fresh decision considering the circular and other material relied upon.

Respondent's Arguments

  • Learned Standing Counsel for the Revenue had no objection to the petitioner's proposition and fairly agreed that the matter could be remitted to the concerned authority for a decision afresh.

Court Order / Findings

  • In view of the fair statement made by the Standing Counsel conceding remand, the Court found no need to examine the circular's applicability on merits itself.
  • The impugned order dated 26.07.2023 was set aside and the matter remitted to respondent no.2 to pass fresh orders within one month, taking into consideration the CBIC circular dated 02.01.2023 as well as any other material relied upon by the petitioner.
  • The writ petition was disposed of in these terms.

Important Clarification

Where a Section 74 or Section 73 order under the CGST/State GST Act mentions a CBIC circular governing ITC mismatches caused by a supplier wrongly mentioning the recipient's GSTIN in GSTR-1, but does not in substance apply the circular's prescribed procedure and relief, the order is vulnerable to being set aside on that ground alone — courts will readily remand rather than adjudicate the ITC entitlement themselves where the Revenue does not resist remand.

Sections Involved

  • Section 74, U.P. GST/CGST Act, 2017 – demand and recovery of tax not paid or input tax credit wrongly availed by reason of fraud, wilful misstatement or suppression of facts.
  • CBIC Circular dated 02.01.2023 – prescribes the procedure for reconciling ITC claimed in GSTR-3B against GSTR-2A where the supplier has wrongly mentioned the recipient's GSTIN while filing GSTR-1.

Decision – In Favour of

In favour of the Assessee — the impugned order was set aside on the Revenue's own concession, though the underlying tax demand is to be reconsidered afresh in light of the circular, leaving the ultimate outcome open.

Case Details

High Court of Judicature at Allahabad (Chief Justice's Court); Writ Tax No.1106 of 2023; Coram: Hon'ble Pritinker Diwaker, Chief Justice, and Hon'ble Ashutosh Srivastava, J.; Order dated 25.09.2023; Neutral Citation: 2023:AHC:185440-DB.

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