The Goods and Services Tax Appellate Tribunal (GSTAT), Lucknow, has held that a demand arising from input tax credit (ITC) reported under an incorrect tax head cannot be sustained merely on that ground without examining the actual availability, admissibility and utilisation of the credit.
However, the Tribunal rejected a separate ITC claim of ₹1,67,790 after finding that the taxpayer had failed to establish that the supplier had actually paid the corresponding tax to the Government.
The Bench of Narendra Kumar (Judicial Member) and Alok Chopra (Technical Member) partly allowed the appeal on November 4, 2026. It remanded the wrong-head ITC issue to the proper officer for verification of GST portal records, while rejecting the challenge concerning credit linked to the supplier’s non-payment of tax.
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The appellant/assessee is engaged in trading grocery items and spices, challenged a demand concerning the financial year 2018-19. The proceedings arose from discrepancies between ITC declared in GSTR-3B and GSTR-9 and the credit reflected in GSTR-2A.
Proceedings were initiated under Section 73 of the Uttar Pradesh Goods and Services Tax Act, 2017, alleging excess availment of ITC.
By an order dated April 30, 2024, the proper officer confirmed a tax demand of ₹6,63,460, comprising CGST and SGST of ₹3,31,730 each, along with a penalty of ₹66,346.
The Additional Commissioner, Grade-II (Appeal-II), Lucknow, upheld the demand on January 27, 2025. The taxpayer subsequently approached the Tribunal.
The taxpayer argued that eligible IGST credit of ₹6,71,751.50 had inadvertently been reported under the CGST and SGST heads while filing GSTR-3B.
It maintained that the discrepancy arose from an unintentional clerical error and did not involve excess availment of credit in substance, an intention to evade tax or any revenue loss.
The taxpayer further submitted that sufficient eligible IGST credit was available. According to it, the authorities had confirmed the demand without examining the electronic credit ledger and relevant returns to determine the actual availability and utilisation of that credit.
The department opposed this explanation, contending that credit reported under CGST and SGST could not be treated as admissible IGST credit merely because the taxpayer described the reporting as inadvertent.
The Tribunal noticed that the taxpayer’s ITC statement reflected an IGST difference of ₹6,71,751.50 between credit recorded in its books, including earlier-period invoices, and credit declared in GSTR-3B. Corresponding differences appeared under the CGST and SGST heads.
However, the figures discussed in the adjudication order did not entirely match those in the taxpayer’s statement. The Bench therefore found that proper reconciliation and verification were necessary.
It held that the taxpayer’s claim regarding eligible IGST credit could not be accepted or rejected merely on the basis of annual return figures. The actual availability, admissibility and utilisation of credit had to be verified against original records and the electronic credit ledger.
The Tribunal referred to the Kerala High Court’s decision in Rejimon Padickapparambil Alex v. Union of India, which concerned IGST credit inadvertently split between CGST and SGST in GSTR-3B.
The order discussed that decision’s treatment of CBIC Circular No. 192/04/2023-GST dated July 17, 2023, concerning interest on wrongly availed IGST credit.
The reasoning considered the aggregate balance under the IGST, CGST and SGST heads when determining whether wrongly availed IGST credit had been utilised for the purpose of interest under Rule 88B.
The Tribunal found this relevant to the taxpayer’s assertion that adequate aggregate credit was available and that the discrepancy was revenue neutral.
It held that the demand could not be sustained merely because credit appeared under an incorrect tax head. Where verification establishes that the principal demand for alleged excess ITC is unsustainable, the consequential interest and penalty cannot independently survive.
Nevertheless, the Tribunal’s relief remained subject to verification. It did not finally reconcile the figures or unconditionally approve the entire disputed credit.
The second issue concerned ITC of ₹1,67,790 on purchases worth ₹33,55,800 from M/s Shree Parasnath Collection, Kamrup, Assam, during August 2018.
The taxpayer submitted that the purchases were genuine, supported by tax invoices and banking records, and reflected in GSTR-2A. It also maintained that the supplier was registered when the transactions occurred and had filed the relevant returns.
The department, however, submitted that GST portal verification showed that the supplier had reported NIL tax liability in GSTR-3B for the disputed period without discharging the corresponding tax.
The Tribunal observed that an invoice’s reflection in GSTR-2A does not, by itself, conclusively establish fulfilment of all statutory conditions for availing ITC.
At the same time, it stated that a claim could not be rejected without examining the relevant invoices, corresponding GSTR-2A details, transaction genuineness, payment particulars and applicable statutory requirements.
The Bench discussed judicial precedents concerning the cumulative conditions under Section 16 and the claimant’s burden to establish entitlement under Section 155.
Ultimately, it found that the taxpayer had failed to establish actual payment of tax on the disputed supplies to the Government, as required under Section 16(2)(c).
Consequently, reliance on invoices, banking records and GSTR-2A entries did not establish entitlement to the ₹1,67,790 credit in the circumstances of the case.
The Tribunal allowed the appeal on the wrong-head ITC issue and remanded the matter to the proper officer to verify the relevant figures, particulars and details available on the GST portal.
Following verification, the officer must extend the consequential benefit of the judicial precedents discussed in the order, in accordance with law.
The Tribunal rejected the appeal on the supplier-default issue because the taxpayer had failed to establish fulfilment of the statutory conditions under Section 16 of the UPGST Act.
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