The Goods and Services Tax Appellate Tribunal (GSTAT), Bengaluru Bench, has held that a difference between GSTR-1 and GSTR-3B can justify initiating demand proceedings, but cannot conclusively establish an additional taxable supply where the taxpayer proves that the discrepancy arose from a duplicated entry.

The bench of Prabhakaran P.M. (Judicial Member) and Ravi Jesuraj S. (Technical Member) set aside a tax demand of ₹2,23,080, together with the related interest and penalty, after finding that supplies aggregating to ₹18.59 lakh had been reported twice in GSTR-1, while tax on those supplies had already been paid through GSTR-3B.

Buy Now: 160+ GST E-Magazine September 2026

However, the bench rejected the taxpayer’s separate jurisdictional challenge. It held that proceedings under Section 73 do not require a prior scrutiny under Section 61 or an audit under Section 65.

The appellant, a Bengaluru-based proprietorship, executed works contracts for government departments during the financial year 2019–20. The departments deducted GST at source under Section 51 and reported the deductions through GSTR-7.

Following an examination of portal data, the Commercial Tax Officer issued a pre-notice intimation in Form GST DRC-01A on February 5, 2024, followed by a show cause notice under Section 73 on March 2, 2024.

The notice raised two issues.

The first concerned a difference of ₹10 lakh between the turnover reported by the deductors in GSTR-7 and the turnover declared by the appellant in GSTR-3B. The appellant admitted the omission and explained that the tax had been paid in the subsequent financial year. The adjudicating authority verified the payment and imposed interest for the delay.

The second issue concerned excess tax declared in GSTR-1 over GSTR-3B, amounting to ₹1,11,540 each under CGST and SGST.

The appellant explained that a taxable value of ₹18.59 lakh had mistakenly been reported in GSTR-1 for both September 2019 and December 2019. Tax on the underlying supplies, it maintained, had been paid through GSTR-3B for December 2019.

The adjudicating authority rejected the explanation on the ground that duplicate reporting could enable recipients to claim input tax credit twice. It also faulted the appellant for not establishing that the recipients had refrained from claiming such credit.

The original order determined a combined demand of ₹4,55,936, including tax, interest and penalty across both issues.

The first appellate authority subsequently upheld the demand relating to the GSTR-1/GSTR-3B mismatch. It reasoned that the appellant had not amended GSTR-1 through the statutory correction mechanism and that the original declarations continued to carry legal force and evidentiary value.

The Tribunal noted that the first appellate authority had recorded the duplication explanation but had not decided whether it was factually correct.

The Tribunal found that the deductors’ GSTR-7 returns supported the appellant’s explanation.

The relevant records showed taxable values of ₹4.19 lakh reported by Garrison Engineer (I) R&D West and ₹14.40 lakh reported by Garrison Engineer (I) R&D East, aggregating to ₹18.59 lakh.

The Tribunal found that the disputed excess arose from repetition of this amount in GSTR-1. Tax on the underlying supplies had already been paid in the December 2019 GSTR-3B.

Crucially, the Revenue had not identified any additional supply corresponding to the repeated declaration.

The Bench held that a mismatch constitutes relevant evidence and places an evidential burden on the taxpayer to explain it. Once a specific and credible explanation is supported by records, however, the authorities must examine that explanation and record a reasoned finding.

Here, the Tribunal concluded that the appellant had discharged that burden.

Rejecting the first appellate authority’s approach, the Tribunal distinguished the evidentiary significance of a return from the existence of a taxable transaction.

An unamended return remains important evidence, the Bench held, but failure to correct it within the prescribed time does not convert an erroneous declaration into an actual supply.

The Tribunal observed, “a failure to amend it within time does not turn an erroneous entry into a taxable supply.”

The ruling therefore recognises that an explanation of duplication must be tested on evidence. A taxpayer’s description of an entry as erroneous does not, by itself, establish the error; equally, the original return cannot conclusively defeat an error that has been proved.

The Tribunal also rejected the adjudicating authority’s reasoning concerning possible double availment of input tax credit.

It noted that the disputed supplies had been reported as consolidated entries in Table 7 of GSTR-1. Such entries were not passed to an identified recipient’s GSTR-2A.

The Bench nevertheless found fault with the appellant’s reporting. The government departments were registered as GST deductors, and the supplies ought to have been reported invoice-wise in Table 4.

That reporting error, however, did not establish a second supply or support the theory of duplicate credit.

The Tribunal further noted that the show cause notice had not alleged double availment of credit. The possibility was introduced in the adjudication order without first putting it to the taxpayer.

An explanation could not be rejected on a footing that the taxpayer had never been asked to meet, the Bench held.

Although the appellant succeeded on merits, its challenge to the officer’s jurisdiction failed.

The Tribunal held that Sections 61, 65 and 73 perform different functions. Scrutiny and audit are verification mechanisms, while Section 73 provides a self-contained process for determining tax not paid or short paid in cases outside the fraud-related circumstances specified in that provision.

Accordingly, the absence of Form GST ASMT-10 or Form GST ADT-02 did not, by itself, invalidate the proceedings.

The Bench also held that an officer posted in the Audit wing could proceed directly under Section 73 where that statutory function had been assigned to the officer. Section 65(7) enables action on audit findings; it does not restrict Section 73 proceedings to cases arising from an audit.

The Tribunal clarified that where scrutiny or audit is actually undertaken, the prescribed procedural requirements must be followed before its results become the basis of a notice.

The department sought a direction requiring the appellant to produce a month-wise and invoice-wise reconciliation for further examination.

The Tribunal declined the request, finding that the existing record resolved the decisive question: whether an additional supply of ₹18.59 lakh had occurred.

The Department held the relevant GSTR-7 returns and had considered the appellant’s explanation through adjudication, the first appeal and the Tribunal proceedings. Yet it had identified no deduction or payment representing a second supply.

A reconciliation of the entire year’s books would not resolve that narrow issue any better, the Bench concluded.

The Tribunal set aside the demand of ₹1,11,540 each under CGST and SGST, along with the related interest and penalties of ₹11,154 under each Act.

The separate interest of ₹5,947 under each Act, already paid in relation to the ₹10 lakh turnover omission, remained undisturbed because that issue was not challenged before the Tribunal.

The Bench also left open any question concerning interest for the interval before payment of tax on the ₹18.59 lakh supplies, explaining that the notice had raised no such demand.

The appeal was allowed on merits, with no order as to costs.

Membership Required to Access Case Details & Order Copy

To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.

Read More: GST Demand Can’t Be Confirmed Without SCN; DRC-01 Summary No Substitute: GSTAT Bengaluru