Mere GSTR-3B and GSTR-2A ITC Mismatch Cannot Attract Section 74 Penalty: GSTAT

I-NXT Vs Sandeep Banga (GSTAT Bengaluru)

Summary: The GST Appellate Tribunal considered whether a 100% penalty under Section 74 of the CGST Act could be sustained where excess input tax credit arose from a mismatch between Form GSTR-3B and Form GSTR-2A, the taxpayer had paid the entire tax with interest before issuance of the show cause notice, and the Department had not established fraud, wilful misstatement or suppression of facts with intent to evade tax.

The dispute related to the period July 2017 to November 2021. During verification by the Anti-Evasion Wing, Bengaluru West GST Commissionerate, excess ITC of Rs.2,74,20,293/- was noticed. The appellant furnished information on 13.1.2022 and, by letter dated 18.1.2022, admitted the lapse and paid the tax along with interest on the same date. The proprietrix stated that the excess availment was due to oversight and that the credit had not been utilised. Nevertheless, a show cause notice dated 28.2.2023 invoked Section 74 on the allegation that excess ITC had been suppressed and payment had been made only after departmental verification. The adjudicating authority confirmed tax of Rs.2,74,20,293/-, interest under Section 50 and an equivalent penalty of Rs.2,74,20,293/- under Section 74(1). The Commissioner (Appeals) upheld the penalty.