Facts of the Case

Tvl.S.P.G.Traders claimed input tax credit of Rs.8,95,454/- for assessment year 2018-19, covered by valid tax invoices. The second respondent issued a show cause notice dated 07.03.2023 alleging excess ITC claim of Rs.7,05,194/- with interest and penalty. The discrepancy arose because the petitioner's seller had misreported the sale as 'business to customer' instead of 'business to business' while filing GSTR-1, causing a mismatch with the petitioner's GSTR-3B claim. The assessment order was passed without the petitioner having an opportunity to produce a Chartered Accountant's certificate under CBIC Circular No.183 dated 27.12.2022, which permits acceptance of such certificates to reconcile such mismatches.

Issues Involved

  1. Whether ITC can be denied to a genuine recipient solely because the supplier misreported the transaction category (B2C instead of B2B) while filing its own GSTR-1/3B returns.
  2. Whether an assessment order passed without considering Circular No.183 dated 27.12.2022, and without giving the assessee a chance to produce a CA certificate, is sustainable.

Petitioner's Arguments

  • The mismatch in ITC claim arose purely due to the seller's misreporting of the transaction category, and not due to any fault of the petitioner, who held valid tax invoices.
  • Circular No.183 dated 27.12.2022 permits acceptance of a Chartered Accountant's certificate to reconcile such mismatches and allow the ITC.
  • The assessee was ready and willing to deposit 25% of the disputed tax amount and produce the CA certificate if the impugned order were set aside.

Respondent's Arguments

  • The Additional Government Pleader fairly conceded that the impugned assessment order was passed without providing an opportunity of hearing to the petitioner, and agreed that the matter could be remanded subject to payment of 25% of the disputed amount.

Court Order / Findings

  • The Court found that the ITC mismatch arose solely due to the seller's erroneous reporting of the transaction as B2C instead of B2B in Form GSTR-1, an error not attributable to the petitioner.
  • The Court held that because of a wrong filing by the seller in Form GSTR-3B, the petitioner cannot be deprived of its legitimate right to avail ITC, especially where there is no loss to the revenue.
  • The impugned order was set aside subject to the petitioner paying 25% of the disputed tax within four weeks, after which the petitioner was granted liberty to file an additional reply along with the CA certificate, for the assessing officer to reconsider the matter in light of Circular No.183.

Important Clarification

  • Genuine recipients of goods/services cannot be denied input tax credit merely because their supplier erroneously classified a transaction as business-to-customer instead of business-to-consumer in the supplier's own GST returns, provided the underlying supply and invoices are genuine.
  • CBIC Circular No.183 dated 27.12.2022 provides a curative mechanism via Chartered Accountant certification for exactly this class of GSTR-2A/3B mismatch, and assessing officers are required to consider it before denying ITC.

Sections Involved

  • Section 16, CGST Act, 2017 — conditions for eligibility to avail input tax credit.
  • CBIC Circular No.183/15/2022-GST, dated 27.12.2022 — prescribes the procedure to address discrepancies between GSTR-2A and GSTR-3B for FY 2017-19, including acceptance of CA certificates.
  • Section 73(9), TNGST/CGST Act, 2017 — the demand provision under which the assessment order was passed.

Decision – In Favour of

The decision is in favour of the assessee (Tvl.S.P.G.Traders), subject to a 25% pre-deposit condition. The assessment order was set aside and the matter remanded for reconsideration in light of Circular No.183.

Case Details

Madurai Bench of Madras High Court; W.P.(MD)No.34878 of 2025 and W.M.P.(MD)No.27567 of 2025; Coram: Hon'ble Mr. Justice Krishnan Ramasamy; Order dated 02.12.2025.

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