The Goods and Services Tax Appellate Tribunal (GSTAT), State Bench at Prayagraj, has set aside a demand of ₹1,92,866 arising from a mismatch between GSTR-3B and GSTR-2A, holding that input tax credit relating to purchases in financial year 2018-19, which had inadvertently remained unclaimed, could validly be availed in April 2019 within the applicable statutory time limit.
The Bench of Mahtab Ahmad (Judicial Member) and Ashish Varma (Technical Member) also found serious procedural defects in the assessment and first appellate proceedings, including inadequate service of notices, failure to provide a personal hearing and disposal of the first appeal without examining the documentary evidence.
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The dispute arose from the taxpayer’s GSTR-3B return for April 2019, in which she claimed ITC of approximately ₹1,62,819. The corresponding GSTR-2A reflected credit of only ₹25,056.
Treating the difference of approximately ₹1,37,762 as wrongly availed and utilised credit, the proper officer initiated proceedings under Section 73 of the GST legislation.
A show cause notice dated December 5, 2020, required a reply by December 14, 2020. A reminder followed. However, the columns specifying the date, time and venue of personal hearing were marked “NA”.
After no reply was received, the officer raised a demand comprising tax, interest and penalty. The demand, rounded to ₹1,92,866 in the operative order, was subsequently upheld by the first appellate authority after the taxpayer failed to appear for the scheduled hearing.
Before the Tribunal, the taxpayer explained that the ITC claimed in April 2019 related to purchases and services received during financial year 2018-19. The credit had inadvertently not been claimed in the corresponding monthly returns.
She supported her explanation with tax invoices, e-way bills, transport documents and GSTR-2A records containing invoice details.
The disputed credit included ₹1,30,815 relating to purchases from Nagpur Pyrolusite Pvt. Ltd., along with smaller amounts arising from purchases and services obtained from other suppliers.
The taxpayer also explained that the ₹25,056 appearing in April 2019 GSTR-2A concerned a separate purchase from Glow Packaging Pvt. Ltd. Although the invoice was dated April 30, 2019, the goods were received in May, and the corresponding credit was claimed in June 2019.
Consequently, the credit appearing in April’s GSTR-2A and the credit claimed in that month’s GSTR-3B related to different transactions.
After examining the supporting records, the Tribunal accepted that the ₹1,62,818.76 claimed in April 2019 represented credit relating to earlier inward supplies that had remained unclaimed.
The Bench also addressed an incorrect description of the month of one purchase. While the appeal described the Nagpur Pyrolusite transaction as relating to July 2018, the documents established that it related to June 2018.
The Tribunal treated this as an inadvertent descriptive error. Since the invoices, e-way bills, transport records and return details enabled the transaction to be reconciled, the incorrect mention of the month did not justify denial of credit.
It further noted that the taxpayer’s explanation was corroborated by records showing excess and unutilised ITC of ₹3,67,216.51 for financial year 2018-19.
Applying Section 16(4) read with Section 39(9), as applicable to the relevant period, the Tribunal held that the omitted credit could legally be claimed in the April 2019 return within the prescribed time limit.
The Tribunal also considered subsequent scrutiny proceedings covering financial year 2019-20, including the April 2019 mismatch.
In response to a notice dated February 24, 2024, the taxpayer had submitted a detailed reconciliation supported by documents. The proper officer accepted the explanation and dropped those proceedings through an order dated May 30, 2024.
The Bench considered this subsequent development as further support for the taxpayer’s reconciliation.
The taxpayer challenged the service of notices on the ground that they had been uploaded under the “Additional Notices & Orders” tab rather than the primary “Notices & Orders” tab on the GST portal.
The Revenue argued that portal notices generated SMS notifications on the registered mobile number and that uploading notices under the additional tab was a known practice at the relevant time.
The Tribunal rejected that explanation in the circumstances of the case. It noted the absence of material supporting the Revenue’s assertion and relied on Allahabad High Court decisions concerning notices placed under the additional tab.
The Bench accepted that the taxpayer had not received a real and effective opportunity to understand the notices and participate in the proceedings.
The Tribunal separately held that the proper officer violated Section 75(4) by failing to specify a personal hearing.
It explained that the provision requires an opportunity of hearing where an adverse decision is contemplated. The taxpayer’s failure to submit a written reply did not dispense with that obligation.
The Bench distinguished the opportunity to file a reply from the opportunity of oral hearing, observing that failure to use one opportunity does not automatically extinguish the other.
Since the notice proposed reversal of ITC together with interest and penalty, the officer was required to fix a hearing before passing an adverse order.
The Tribunal also criticised the first appellate authority for treating the taxpayer’s absence as a sufficient basis to reject the appeal without examining her written grounds and supporting evidence.
The appeal memorandum already contained a detailed explanation of the mismatch, along with invoices and other records. Those materials required consideration even if the taxpayer did not attend the hearing.
The Bench held that the appellate order failed to satisfy Section 107(12), which requires the authority to state the points for determination, its decisions and the reasons supporting them.
It additionally found procedural unfairness in the manner in which the authorities passed the impugned orders on later dates without fixing and communicating those dates, relying on the Allahabad High Court authorities discussed in the judgment.
Although the procedural violations could have warranted a fresh adjudication, the Tribunal concluded that remand would serve no useful purpose.
The relevant documents were already available, and the Tribunal could determine both the factual reconciliation and the legal entitlement. Sending an approximately seven-year-old dispute back to the original authority would merely consume additional time and money, it observed.
The Tribunal allowed the appeal, set aside both orders and struck off the ₹1,92,866 demand. It also directed that any amount deposited pursuant to the impugned proceedings be refunded in accordance with law, subject to verification of payment and statutory requirements.
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