The Goods and Services Tax Appellate Tribunal (GSTAT), Raipur Bench, has rejected an appeal against a GST demand arising from an unreconciled turnover of ₹3.51 crore disclosed in Table 7G of its GSTR-9C for the period July 2017 to March 2018.
The bench of Pradeep Kumar Vyas (Judicial Member) and Chandra Bhushan Singh (Technical Member) has observed that although interest income covered by Entry 27 of Notification No. 12/2017-Central Tax (Rate) is exempt, the appellant was required to substantiate, through documentary evidence, that the disputed amount actually represented exempt interest income attributable to another State and had been erroneously reported as Chhattisgarh turnover.
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The case originated from scrutiny of the bank’s GST returns by the proper officer under Section 61 of the GST Act read with Rule 142(1A) of the GST Rules. The department issued Form GST ASMT-10 on March 30, 2022, followed by reminders on June 12, June 24 and September 20, 2022.
According to the Tribunal’s order, the appellant did not submit a reply within the prescribed period. The department subsequently issued Form DRC-01A and, on September 27, 2023, issued a show cause notice in Form DRC-01. The assessing officer treated ₹3,51,68,888 as taxable turnover and imposed GST at 18 per cent, along with interest and penalty.
The quantified demand, including tax, interest and penalty, came to approximately ₹1.32 crore.
The bank contended that the disputed amount of ₹3,51,62,835 represented exempt interest-related adjustments and should not have been treated as taxable turnover.
The bank relied upon Entry 27 of Notification No. 12/2017-Central Tax (Rate), which provides exemption for services by way of extending deposits, loans or advances insofar as the consideration is represented by interest or discount, other than interest involved in credit card services.
The appellant’s case was that the disputed figures represented various interest-related accounting adjustments, including: “Clawback Interest Reversal – NPA”; “EIS Interest Reversal on Securitisation Transactions”; “Interest Reversal for Value-Dated Transactions”; and “Provision for Interest Accrued on NACH Cheque Bounce Cases.”
The bank claimed that the amounts related to interest income attributable to other States but had inadvertently been disclosed as Chhattisgarh turnover in GSTR-1/3B.
On the first question of law, the Tribunal ruled in favour of the appellant.
The Tribunal framed the first question as whether the interest income claimed by the appellant was exempt under Notification No. 12 dated June 28, 2017.
After examining Entry 27, the Tribunal observed that consideration represented by way of interest, other than interest involved in credit card services, is covered by the exemption. It accordingly held that the first question was to be decided in favour of the appellant.
However, this finding did not result in relief to the bank because the Tribunal found that the appellant had failed on the factual and evidentiary aspect of its exemption claim.
The crucial issue before the Tribunal was whether the disputed turnover actually represented exempt interest income pertaining to another State and had mistakenly been disclosed as Chhattisgarh turnover.
The Tribunal held that, to claim the benefit of Notification No. 12/2017, the appellant had to establish three essential facts: that the amount represented exempt interest income; that the income related to another State; and that it had been erroneously reported in GSTR-1/3B as Chhattisgarh turnover for the relevant financial year.
The Tribunal noted that although the appellant had submitted a detailed reply in Form DRC-06 on November 3, 2023, it had failed to furnish documentary evidence establishing that the disputed interest income related to another State and had been wrongly reported in Chhattisgarh.
It specifically held that the mere filing of GSTR-9C, despite being a statutory requirement, did not dispense with the obligation to produce supporting documentary evidence when such evidence was specifically sought by the department. According to the Tribunal, the burden was on the appellant to substantiate its claim through cogent and relevant evidence.
The bank had also relied upon a certificate issued by a Chartered Accountant dated March 7, 2024.
The Tribunal, however, found that the certificate did not disclose the findings or conclusions arrived at after examination of the underlying documents. It also did not specify the documentary basis on which the bank’s claim had been verified.
Consequently, the Tribunal held that the certificate did not establish that the disputed amount represented interest income or the other transactions claimed by the bank.
The Tribunal further noted that the appellate authority had found that the bank had produced a consolidated audit report but had not supplied specific documentary evidence supporting the amounts claimed under the various categories of interest reversals.
The Tribunal therefore held that a consolidated audit report, without supporting documents relating to the individual disputed items, was insufficient to substantiate the claim.
During the proceedings, the bank’s representative argued that the audit was conducted at the PAN-India level and, therefore, it was not possible to separately produce evidence demonstrating that interest income attributable to another State had inadvertently been reported as Chhattisgarh turnover.
The Tribunal did not accept this explanation.
It noted that the appellant could have produced the relevant evidence before the assessing officer, the first appellate authority or the Tribunal but had failed to do so at every stage.
The Tribunal consequently invoked the principle reflected in Section 114(g) of the Indian Evidence Act, 1872, now corresponding to Section 119(g) of the Bharatiya Sakshya Adhiniyam, 2023, and observed that an adverse inference could be drawn where evidence capable of being produced was withheld.
The bank had also raised several procedural objections.
It contended that the proper officer had not considered its reply, that no proper personal hearing had been provided, that the show cause notice lacked adequate details and that the order was effectively identical to the DRC-01, indicating non-application of mind.
The appellant further alleged violation of Section 75(4) and Section 75(7) of the GST Act, as well as the constitutional principle under Article 265, which provides that no tax shall be levied or collected except by authority of law.
The department disputed these allegations. It submitted that the necessary communications had been issued and that the appellant had been provided an opportunity of personal hearing. The department also maintained that the bank had failed to provide the State-specific documentary evidence necessary to support its claim.
The Tribunal ultimately observed that, even assuming that the procedural non-compliance alleged by the appellant had occurred and adequate opportunity had been provided, the ultimate outcome would not have been different because the substantive evidentiary deficiency remained.
While GSTAT accepted that interest covered by Entry 27 of Notification No. 12/2017 is exempt, it found that the bank had not established that the specific disputed amount qualified for that exemption.
The Tribunal’s reasoning turned principally on the absence of documentary proof connecting the disputed adjustments with identifiable interest income attributable to another State and establishing that such income had been wrongly included in Chhattisgarh turnover.
GSTAT held that the citations relied upon by the bank did not assist its case because the central factual requirement—proof of interest income attributable to another State and erroneously disclosed in Chhattisgarh—remained unsubstantiated.
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