A GST Appellate Tribunal has emphasised the necessity of invoice-specific verification prior to denying input tax credit due to discrepancies between GSTR-3B and GSTR-2A, highlighting procedural lapses and the importance of a proper hearing in tax adjudication.
A GST Appellate Tribunal has ruled that input tax credit cannot be rejected simply because a taxpayer’s GSTR-3B return does not match GSTR-2A, if the discrepancy may be explained by invoices from an earlier financial year and has not been checked invoice by invoice. The case involved a quarrying business that sold crushed stone and faced a demand for FY 2018-19 after officers treated a mismatch of ₹2,33,502 as excess credit and confirmed tax, interest and penalty totalling ₹4,60,582 under Section 73.
The taxpayer argued that the credit in question related to FY 2017-18 and had been claimed within the time allowed under Section 16(4). The Tribunal agreed that the entries in GSTR-2A for the relevant period could not, by themselves, be treated as conclusive proof that the credit was ineligible. It said the explanation required detailed verification against invoices rather than a broad assumption that the suppliers had not discharged tax.
The tribunal also took issue with the manner in which the case had been handled. It said a personal hearing is mandatory under Section 75(4) when an adverse order is being considered, and that the absence of any effective hearing undermined the adjudication. The show-cause notice reportedly marked the hearing field as “NA”, and the first appellate authority upheld the demand without examining the reconciliation advanced by the taxpayer.
The tribunal, however, rejected the argument that the proceedings were void because FORM GST ASMT-10 had not been issued. It held that scrutiny under Section 61 and proceedings under Section 73 operate independently, so the omission did not, on its own, invalidate the case. The matter has now been sent back for fresh adjudication, with directions for invoice-wise verification using FY 2017-18 GSTR-2A, supplier GSTR-1 returns, ITC registers, books of account and GSTR-9 and GSTR-9C statements.
The proper officer has also been told to apply CBIC Circular No. 183/15/2022-GST, grant a proper hearing and pass a reasoned fresh order within 12 weeks. Any interest and penalty will depend on the outcome of that reconsideration.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
