The Goods and Services Tax Appellate Tribunal (GSTAT), Ernakulam Bench, has set aside a demand arising from alleged excess input tax credit (ITC) of ₹13.97 lakh, holding that surplus eligible IGST credit could be adjusted against the shortfall under CGST and SGST.
The bench of Subramanya Rayaprol (Vice-President) and Ramamoorthi Sriram (Technical Member) found that a complete reconciliation, including IGST paid on imports, showed that the taxpayer’s eligible credit exceeded the credit actually claimed.
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The Bench found serious violations of natural justice. The original adjudicating authority had neither afforded a personal hearing nor discussed the taxpayer’s contentions, while the first appellate authority had mechanically confirmed the demand through a non-speaking order.
The principal issue was whether a demand for excess ITC could survive on the basis of differences under individual tax heads when a complete reconciliation showed sufficient surplus IGST credit to cover the CGST and SGST differences.
The Tribunal also examined whether the authorities could sustain the demand without considering import-related IGST credit, addressing the taxpayer’s evidence, or providing a personal hearing.
The appellant/assessee is the super distributor of Oppo Mobile India Private Limited in Kerala, is engaged in distributing mobile phones and allied electronic products.
The company received a show cause notice dated July 22, 2023, under Section 73(1) of the CGST/KSGST Acts, alleging excess ITC availment of ₹13,97,613 on a comparison of GSTR-2A with GSTR-3B.
The proper officer confirmed the demand through an order dated December 14, 2023. The Joint Commissioner (Appeals), Ernakulam, subsequently dismissed the company’s appeal on June 6, 2025, prompting it to approach GSTAT.
The dispute concerned ITC reconciliation for financial year 2017–18.
The company argued that the demand arose from an incomplete comparison of return data. According to it, the authorities examined individual tax components without considering the overall credit position or reconciling the figures with the annual return.
A central objection was the exclusion of ₹56,31,242 in IGST credit on imported goods. The company submitted that this credit was supported by Bills of Entry and reflected in the import-related portion of GSTR-2A.
It explained that the portal’s ITC comparison report for transactions “other than import of goods” excluded import-related credit by design. That limitation, it argued, could not justify disregarding otherwise eligible credit.
The company also pointed to differences between the figures adopted in the demand proceedings, the latest GSTR-2A data, and the figures appearing in GSTR-9.
Its reconciliation showed total available ITC of ₹45,24,29,934.57, against ITC of ₹44,78,81,069.87 claimed in GSTR-3B, leaving an overall unavailed balance of ₹45,48,864.70.
Although the reconciliation reflected CGST and SGST differences of ₹1,37,242.10 and ₹1,36,452.71 respectively, the company maintained that these were fully covered by unavailed IGST credit of ₹48,22,559.51.
The department argued that CGST, SGST and IGST were separate statutory taxes and that the provisions governing utilisation of credit did not permit excess availment under one head to be neutralised merely because credit under another head remained unclaimed.
It also relied on Section 16(2)(c), which requires actual payment of the tax charged on a supply to the government, and Section 155, which places the burden of establishing ITC eligibility on the claimant.
The departmental representative contended that possession of invoices and evidence of payment to suppliers did not, by themselves, establish that the corresponding tax had reached the government.
The Tribunal noted that the department had not disputed or rebutted the taxpayer’s factual reconciliation. It specifically recorded that the submissions concerning the failure to account for IGST on imported goods were also not rebutted during the hearing.
On the basis of the reconciliation, the Bench found that the overall available credit exceeded the credit claimed, notwithstanding the differences under CGST and SGST.
The Tribunal consequently examined whether the surplus IGST credit could cover those differences.
The Tribunal observed that IGST credit was first to be utilised towards IGST liability, with the remaining amount available for payment of central tax and State tax in the prescribed order.
The Bench held that the taxpayer had a vested right to use surplus IGST credit, after discharging IGST liability, to meet a shortfall in CGST or SGST. The Revenue’s contrary contention, it said, ran against the statutory provision.
The Tribunal also relied on the Kerala High Court’s decision in Rejimon Padickapparambil Alex v. Union of India, which discussed the treatment of the electronic credit ledger as a unified resource with separate tax compartments.
It referred to the High Court’s consideration of CBIC Circular No. 192/04/2023-GST dated July 17, 2023, concerning interest on wrongly availed IGST credit, and noted that subsequent Kerala High Court decisions had followed the ruling.
Applying the jurisdictional High Court’s reasoning, the Bench held that the surplus IGST credit could be set off against the CGST and SGST shortfalls. Even after that adjustment, the reconciliation left an overall credit surplus of approximately ₹45.49 lakh.
It therefore concluded that no case of short payment warranting invocation of Section 73 had been made out.
The Tribunal independently found that the original adjudication suffered from a fundamental breach of natural justice.
After examining the order, it recorded that the adjudicating authority had not provided a hearing or discussed the company’s contentions. Describing the order as a “unilateral litany of charges”, the Bench held that it was null and void on that ground alone.
The first appellate authority also came under criticism for recording the company’s submissions without analysing the evidence or addressing its arguments. The Tribunal held that the mechanical confirmation of the demand through a non-speaking order displayed non-application of mind and violated natural justice.
The Bench further observed that the show cause notice was confined to the alleged difference between GSTR-2A and GSTR-3B.
Once that alleged excess credit was addressed, nothing else survived in the proceedings. The Revenue’s arguments under Sections 16(2)(c) and 155 were held irrelevant to the dispute because the notice contained no specific allegation against the company under those provisions.
The Tribunal accordingly allowed the appeal and set aside the impugned appellate order with consequential relief.
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