ITC Cannot Be Denied merely Based on GSTR 2A & 3B Discrepancies: Kerala HC

Henna Medicals Vs State Tax Officers (Kerala High Court)

Introduction: In a significant ruling, the Kerala High Court has directed the re-evaluation of a case involving input tax credit (ITC) claimed by Henna Medicals Bus Stand Road against an assessment order and a recovery notice. The petitioner sought ITC amounting to Rs. 2,58,116, inclusive of interest and penalty, totaling approximately Rs. 4,58,156. The crux of the matter lies in the disparities between GSTR 2A and GSTR 3B.

Analyzing the Court’s Decision

1. Grounds for ITC Denial: The assessment order under scrutiny primarily denied the petitioner’s input tax credit based on the variance between GSTR 2A and GSTR 3B. However, the Kerala High Court referred to crucial precedents, including the Supreme Court’s judgment in the case of The State of Karnataka v. M/s Ecom Gill Coffee Trading Private Limited and the Calcutta High Court’s ruling in Suncraft Energy Private Limited v. The Assistant Commissioner, State Tax, Ballygunge Charge. The court emphasized that ITC claims in the Goods and Services Tax (GST) regime cannot be dismissed solely due to differences in GSTR 2A and GSTR 3B.

2. Court’s Directive: Paragraph 8 of Diya Agencies v. The State Tax Officer of the Kerala High Court’s decision held that denying input tax credit to the petitioner based solely on the GSTR 2A and 3B mismatch was unsustainable. The court ordered the matter to be sent back to the Assessing Authority for a thorough review of the evidence provided by the petitioner regarding their ITC claim. It stressed that a legitimate and genuine claim should not be rejected merely because GSTR-2A does not reflect the tax in question. The Assessing Authority was directed to grant the petitioner an opportunity to present evidence supporting their higher ITC claim. The petitioner was instructed to appear before the Assessing Officer with all relevant evidence on October 3, 2023.

Conclusion: The Kerala High Court’s directive in the case of Henna Medicals Bus Stand Road reaffirms the principle that discrepancies between GSTR 2A and GSTR 3B alone cannot serve as grounds for denying input tax credit in the GST regime. The court’s decision emphasizes the importance of examining the merits of each case and granting a fair opportunity to taxpayers to substantiate their claims. This ruling underscores the need for a balanced and just approach in matters related to GST assessments and input tax credit.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

The present writ petition has been filed, impugning Ext.P1 assessment order and Ext.P2 recovery notice dated 28.12.2021 and 02.09.2023, respectively. The petitioner claims input tax credit to the extent of Rs.2,58,116/- with interest and penalty. The total amount comes to approximately Rs.4,58,156/-.

2. From the perusal of the Assessment Order impugned in the present writ petition, it appears that the only ground on which the petitioner has been said to have availed the input tax credit is the difference between GSTR 2A and GSTR 3B. This Court, after taking note of the judgment of the Supreme Court in the case of The State of Karnataka v. M/s Ecom Gill Coffee Trading Private Limited¹ as well as Calcutta High Court judgment in Suncraft Energy Private Limited v. The Assistant Commissioner, State Tax, Ballygunge Charge² has held that the input tax credit of the assessee under the GST regime cannot be denied merely on the difference of GSTR 2A and 3B.

3. Paragraph 8 of Diya Agencies v. The State Tax Officer³of this Court would read as under:

“8. In view thereof, I find that the impugned Exhibit P-1 assessment order so far denial of the input tax credit to the petitioner is not sustainable, and the matter is remanded back to the Assessing Officer to give opportunity to the petitioner for his claim for input tax credit. If on examination of the evidence submitted by the petitioner, the assessing officer is satisfied that the claim is bonafide and genuine, the petitioner should be given input tax credit. Merely on the ground that in Form GSTR-2A the said tax is not reflected should not be a sufficient ground to deny the assessee the claim of the input tax credit. The assessing authority is therefore, directed to give an opportunity to the petitioner to give evidence in respect of his claim for input tax credit. The petitioner is directed to appear before the assessing authority within fifteen days with all evidence in his possession to prove his claim for higher claim of input tax credit. After examination of the evidence placed by the petitioner/assessee, the assessing authority will pass a fresh order in accordance with law.”

4. In view thereof, the present writ petition is allowed. The matter is remitted back to the file of the Assessing Authority/1^st respondent to examine the evidence of the petitioner irrespective of the Form GSTR 2A for the petitioner’s claim for the input tax credit. After examination of the evidence placed by the petitioner/assessee, the Assessing Authority shall pass fresh orders in accordance with the law. The petitioner is directed to appear before the Assessing Officer on 03.10.2023 at 11.00 a.m. with all the evidence in support of his claim for input tax credit.

Notes: 

1 2023 (3) TMI 533 SC

2 Judgment dated 02.08.2023 in MAT No.1218/2023

3 Judgment dated 12.09.2023 in WPC 29769/2023