Biocon Limited Vs State of Karnataka (Karnataka High Court)
ITC on import of goods and SEZ procurements cannot be denied for FY 2018-19 as GSTR 2A did not capture Import data during impugned period: Karnataka High Court
The Karnataka High Court held that Input Tax Credit (ITC) relating to imports and SEZ procurements for FY 2018-19 cannot be denied merely due to mismatch between Form GSTR-3B and Form GSTR-2A, since GSTR-2A, by design, did not capture such transactions during the relevant period. The Court observed that the petitioner had inadvertently disclosed import and SEZ-related ITC under the wrong table in GSTR-3B, which was subsequently rectified in GSTR-9 filed within the prescribed timeline. It further noted that Bill of Entry is the statutory document for availing ITC on imported goods under Rule 36(1)(d), and prior to insertion of Section 16(2)(aa) with effect from January 1, 2022, there was no legal requirement to match such credits with GSTR-2A. Accordingly, the Court quashed the demand of ₹20.01 crore raised solely on GSTR-3B versus GSTR-2A mismatch and remanded the remaining issues for fresh adjudication.
Facts:
- Biocon Limited (“the Petitioner”) is engaged in the manufacture and supply of pharmaceutical products and is duly registered under the CGST Act, 2017 and KGST Act, 2017.
- For FY 2018-19, the Petitioner imported goods and procured goods from Special Economic Zone (“SEZ”) units. The ITC pertaining to such import of goods (Rs. 7,73,73,105/-) and SEZ procurements (Rs. 13,68,11,797/-) was inadvertently reported in Form GSTR-3B under Table 4(A)(5) (“All Other ITC”) instead of Table 4(A)(1) (specifically meant for “Import of Goods”).
- This reporting error was subsequently rectified by the Petitioner in Form GSTR-9 (Annual Return) by correctly disclosing the said credits under Table 6E (“Import of goods including supplies from SEZ”), filed prior to October 31, 2020.
- The Deputy Commissioner of Commercial Taxes, Audit-4.7 (“the Respondent”) initiated audit proceedings and issued pre-intimation in Form GST DRC-01A dated December 06, 2023 proposing liability of Rs. 1,15,15,27,040/- under Section 73(5) of the CGST/KGST Act.
- Thereafter, a Show Cause Notice (“SCN”) dated December 29, 2023 was issued under Section 73(1) of the CGST/KGST Act demanding Rs. 90,82,01,601/- along with interest and penalty.
- Pursuant to the Petitioner’s detailed reply and personal hearing, the Respondent passed Order-in-Original dated February 22, 2024 (“Impugned Order”) under Section 73(9) of the CGST/KGST Act confirming tax demand of Rs. 30,37,84,642/- along with interest of Rs. 29,14,02,162/- and penalty of Rs. 3,03,78,464/-. Out of the said demand, Rs. 20,00,82,381/- pertained solely to alleged excess availment of ITC on account of GSTR-3B vis-à-vis GSTR-2A mismatch.
- The Respondent rejected the Petitioner’s reconciliation on the ground that GSTR-9 is not a return for availing ITC under Section 16(4) of the CGST Act, and that the credit allegedly reported in July 2018 GSTR-3B did not match the actual figures of that month.
- Aggrieved by the Impugned Order, the Petitioner filed the present writ petition under Articles 226 and 227 of the Constitution of India before the Hon’ble High Court of Karnataka.
Issue:
