In a significant ruling, the Kerala High Court, in the case of Mina Bazar vs. State Tax Officer-1, has underscored that Input Tax Credit (ITC) under the Goods and Services Tax (GST) regime cannot be denied solely based on discrepancies between GSTR 2A and GSTR 3B. This judgment has far-reaching implications for businesses and tax authorities, as it clarifies the criteria for availing ITC and sets a precedent for similar cases.
1. The Basis of the Writ Petition: The writ petition challenges the assessment order (Ext.P1) and the subsequent recovery notice (Ext.P2) issued on August 20, 2022, and July 24, 2023, respectively.
2. The Grounds for Denial of ITC: The assessment order reveals that the primary reason for denying the petitioner’s claim for Input Tax Credit was the mismatch between GSTR 2A and GSTR 3B.
3. Precedent from Diya Agencies Case: The Kerala High Court referred to its earlier judgment in Diya Agencies vs. State Tax Officer, where it examined the denial of ITC based on GSTR discrepancies. The court cited the Supreme Court’s decision in the case of The State of Karnataka vs. M/s Ecom Gill Coffee Trading Private Limited and a Calcutta High Court judgment in Sun craft Energy Private Limited vs. The Assistant Commissioner, State Tax, Ballygunge Charge.
4. Key Holding from Diya Agencies Case: Paragraph 8 of the Diya Agencies case judgment highlights that denial of Input Tax Credit solely due to the difference between GSTR 2A and GSTR 3B is not sustainable. The court ruled that the assessing authority must provide an opportunity for the petitioner to substantiate their claim for ITC. If the evidence proves the claim to be bonafide and genuine, ITC should be granted. The court emphasized that discrepancies in Form GSTR-2A alone should not suffice as grounds for denying ITC.
5. Remittance of the Matter: In alignment with the precedent set in Diya Agencies, the Kerala High Court allowed the writ petition and remitted the matter back to the Assessing Authority. The court directed the authority to thoroughly examine the evidence presented by the petitioner regarding their claim for Input Tax Credit, irrespective of the Form GSTR 2A. Subsequently, the Assessing Authority is instructed to issue fresh orders in accordance with the law.
6. Direction to the Petitioner: The petitioner is required to appear before the Assessing Officer on October 3, 2023, at 11:00 a.m., along with all the necessary evidence supporting their claim for Input Tax Credit.
Conclusion: The Kerala High Court’s ruling in Mina Bazar vs. State Tax Officer-1 serves as a significant clarification regarding Input Tax Credit under the GST framework. It highlights that discrepancies between GSTR 2A and GSTR 3B should not be the sole reason for denying ITC. This judgment reinforces the principle that ITC should not be arbitrarily withheld and underscores the importance of allowing taxpayers the opportunity to substantiate their claims with evidence. This decision is poised to have a considerable impact on similar cases and provides much-needed clarity on this critical aspect of GST compliance.
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 20.08.2022 and 24.07.2023, respectively.
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, in Diya Agencies v. The State Tax Officer (Judgment dated 12.09.2023 in WPC 29769/2023), 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 Limited (2023 (3) TMI 533 SC) as well as Calcutta High Court judgment in Sun craft Energy Private Limited v. The Assistant Commissioner, State Tax, Ballygunge Charge (Judgment dated 02.08.2023 in MAT No.1218/2023) 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 (supra) of 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 to examine the evidence of the petitioner irrespective of the Form GSTR 2A for petitioner’s claim of 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.