Santosh Jaiswal Vs Anand Surana (GSTAT Kolkata)
Summary: The Kolkata Bench of the Goods and Services Tax Appellate Tribunal remanded a dispute concerning transitional credit of ₹21,72,496 for limited verification by the Proper Officer/Adjudicating Authority, while separately holding that the notice issued under Section 74(1) of the CGST Act, 2017 was not sustainable. The departmental appeal under Section 112(3) challenged first appellate order No. 216/SLG-GST/2022-23 dated 20 March 2023 concerning Micro Labs Limited, Mamring, Sikkim. The Tribunal did not finally determine the taxpayer’s entitlement to the disputed credit.
The dispute arose because the taxpayer claimed transitional credit of ₹65,59,997 in Table 5(a) of Form TRAN-1, whereas the closing credit balance reported in the June 2017 ER-1 return was ₹43,87,501. The taxpayer explained that input service credit of ₹21,72,496 had inadvertently been omitted from the relevant return column and that a technical error in the ACES portal prevented acceptance of the revised ER-1 return. The adjudicating authority rejected this explanation and, by an order dated 10 February 2022, confirmed recovery of the differential credit, interest under Section 50 and penalty under Section 122(2)(b).
The Additional Commissioner (Appeals) treated the omission as a procedural lapse that could not, by itself, justify denial of a substantive benefit. The taxpayer’s appeal was allowed with consequential relief subject to verification, scrutiny and exact quantification of eligible input service credit on the basis of supporting documents and records. The Revenue challenged this relief, contending that Section 140(1) permitted transition only of CENVAT credit carried forward in the last return filed under the earlier law. According to the Revenue, the excess credit of ₹21,72,496 had been wrongly availed and utilised and was recoverable with interest and penalty.
After hearing both sides and examining the records, the Tribunal noted that the difference between the ₹65,59,997 declared in TRAN-1 and the ₹43,87,501 reflected in the ER-1 and ST-3 returns remained undisputed. It held that the difference required thorough verification and remanded the matter only for that limited purpose and for passing a reasoned order. The taxpayer was directed to produce the relevant records without delay, and the adjudicating authority was required to complete the exercise within six months from communication of the order.
On the separate question of invoking Section 74(1), the Tribunal rejected the inference that incorrect information automatically established wilful misstatement. The adjudicating authority had relied on repeated return filings in July 2017 and the taxpayer’s subsequent intimation of the mistake to allege deliberate suppression and an intention to evade tax. The Tribunal held that mere wrong or incorrect information did not, ipso facto, establish wilful misstatement. It relied on Commissioner CGST & CX, Kolkata North Vs Power Tech Global Private Limited, including its discussion of CBIC Instruction No. 05/2023-GST dated 13 December 2023, and the Supreme Court’s decision in Anand Nishikawa Co. Ltd. Vs Commissioner of Central Excise, Meerut, (2005) 7 SCC 749. Applying those principles, it found that wilful misstatement or suppression had not been established against the respondent. The operative result therefore combined a limited remand for credit verification with an express finding that the Section 74(1) notice was unsustainable.
Cases Discussed
- Commissioner CGST & CX, Kolkata North Vs M/s Power Tech Global Private Limited — (2026) 1 GSTAT E-Journal 51 (GSTAT Kolkata). Relied upon for the requirement of evidence establishing fraud, wilful misstatement or suppression with an intention to evade tax before invoking Section 74(1).
- Commissioner of Customs, Central Excise and Service Tax, Bangalore (Adjudication) Vs Northern Operating Systems Private Limited — Civil Appeal Nos. 2289–2293 of 2021, decided on 19 May 2022 (Supreme Court). Referred to within the reproduced Power Tech Global discussion as the background to CBIC Instruction No. 05/2023-GST; the present dispute concerned transitional credit rather than secondment services.
- Anand Nishikawa Co. Ltd. Vs Commissioner of Central Excise, Meerut — (2005) 7 SCC 749 (Supreme Court). Applied through the reproduced precedent for the principle that suppression must be construed strictly and must involve a deliberate and wilful act intended to evade duty.
FULL TEXT OF THE ORIGINAL JUDGMENT/ORDER
[1]. This appeal under section 112(3) of CGST Act,2017 has been preferred by the Deputy Commissioner (Appeal & Review), Siliguri CGST & CX Commissionerate against the appeal order (No. 216/SLG -GST/2022-23 dated 20.03.2023) passed by the Additional Commissioner (Appeal) CGST, Siliguri Appeal Commissionerate under section 107(11) of CGST Act, 2017 in the appeal filed by Micro Labs Limited., Mamring, South Sikkim Namthang Road, Mamring, Sikkim-737132 holding GSTIN-11AABCM2131N1ZV.
[2]. In course of scrutiny of transitional credit availed under Table 5(a) of the TRAN-1 return, it was observed that the respondent availed transitional credit of Rs.65,59,997/- whereas the closing balance of ER -1 Return for the month of June-17 was Rs.43,87,501/-. The taxpayer replied that they inadvertently missed to report an amount of Rs. 21,72,496/- of input service credit in the column for ‘credit taken on input services’. Due to technical error in the ACES portal the revised ER-1 return was not accepted. The reply was not found satisfactory and the Adjudicating Authority was of the opinion that transitional credit of Rs. 21,72,496/- had been claimed in excess which is not eligible as transitional credit. A n SCN under section 74(1) of CGST Act, 2017 was issued which culminated in a demand order for wrongly availed transitional credit of Rs. 21,72,496 /- along with interest under the provisions of section 50 and penalty under Section 122(2)(b) of the CGST Act, 2017.
[3]. Aggrieved by the impugned order dated 10.02.2022 passed by the Adjudicating Authority, the taxpayer preferred an appeal before the Additional Commissioner (Appeals), Siliguri Appeal Commissionerate. The Appellate Authority took the view that “it is crystal clear from the above that there was a procedural lapse on the part of the appellant. This being a procedural lapse cannot be ground for denying the substantial benefit to the appellant. there is procedural lapse on the part of the Appellant and procedural lapse cannot be the ground for denying the substantial benefit to the Appellant.” The Appellate Authority allowed the appeal, Adjudicating Authority with “al l consequential relief to the appellant subject to verification/scrutiny and exact quantification of ITC pertaining to balance credit of input services, to which Appellant is rightfully entitled on the strength of relevant documents and records in their possession.”
[4]. In the grounds of appeal, the appellant has contended that as per the provisions of section 140(1) of CGST Act,2017, a taxpayer is entitled to take only CENVAT credit carried forward in the last return under the erstwhile tax regime to their electronic credit ledger under GST regime. Therefore, the taxpayer was entitled to avail transitional credit of Rs.43,87,501/- while he actually availed Rs. 65,59,997/-. The wrongly availed transitional credit of Rs.21,72,496/- and utilised by him is recoverable under section 74 of CGST Act along with appropriate interest u/s 50 and penalty u/s 122(2)(b) of the CGST Act, 2017
[5]. We have heard Mr. Wanlambor, Superintendent, CGST appearing for the appellant and Mr. Cherian Punnoose, Ld. Advocate and also gone through the records including the impugned first appellate order and the OIO. It remains undisputed that while the amount of CENVAT credit shown in Table 5(a) of TRAN- 1 was 65,59,997/-, the closing balance of CENVAT credit as per ER-1 and ST -3 return filed under the ‘existing law’ was Rs. 43,87,501/-.
[6]. Evidently, the difference requires a thorough verification by the authorities concerned. Therefore, we remand the case to the Proper Officer/Adjudicating Authority only for this limited purpose and for passing a reasoned order Labs Ltd is also directed to produce all relevant records before the authorities without any delay. The Adjudicating Authority should complete the whole exercise within a period of six months from the date of communication of this order.
[7]. We also find notice issued under sub- section (1) of section 74 not sustainable. It was observed in the OIO
“ It is to be noted that the assessee themselves admitted that they filed the return three times on 09.07.2017, 10.07.2017 and then again on 12.07.2017. Surprisingly in none of the above instances the assess found out the mistake and it was only on 28.07.201 7 they informed the department. Hence it appears the assess wilfully supressed the information with malafide intention to evade payment of tax. …….Further, the wilful mis-statement by the assessee in their TRAN- 1 returns clearly shows an intention to misgu ide the department with intention to evade their GST liabilities”.
But mere wrong or incorrect information does not, ipso facto, establish charges of wilful mis-statement.
The Kolkata Bench of GSTAT has explained in the case of Commissioner CGST &CX Kolkata North vs M/s Power Tech Global Private Limited (2026) 1 GSTAT E- Journal 51 (Kolkata))
“61. Pursuant to the direction of the Hon’ble Supreme Court in the case of Northern Operating Systems Private Limited (NOS) in Civil Appeal No.2289- 2293 of 2021, an instruction bearing No.05/2023- GST was issued by CBIC vide F.No.CBIC20004/3/2023-GST, dated 13th December, 2023 stating therein that Section 74(1) can be invoked only in cases where there is a fraud or wilful mis- statement or taxpayer. The said instruction contains that Section 74(1) cannot be invoked merely on account of non- payment of GST, without specific element of fraud or wilful mis – statement or suppression of facts to evade tax. It also provides that only in the cases w here the investigation indicates that there is material evidence or fraud or wilful mis- statement or suppression of fact to evade tax on the part of the taxpayer, provisions of Section 74(1) of CGST Act may be invoked for issuance of show cause notice, and such evidence should also be made a part of the show cause notice.
62. In the case in hand no investigation was carried out and no evidence has been brought on record on the part of the revenue to establish fraud, wilful mis- statement or suppression of facts within the meaning of Section 74(1) read with Explanation 2 to sub- section (12) of Section 74 of the CGST Act, 2017. If we go further, suppression of facts cannot be equated with ordinary non- declaration. The wordings of Section 74(1) clearly indicates that there must be a deliberate intention on the part of the taxpayer to evade tax.
63.In the case of Anand Nishikawa Co. Ltd. Vs. Commissioner of Central Excise, Meerut, reported in (2005) 7 SCC 749, the Hon’ble Supreme Court in paragraph 26 of the judgment succinctly held that the “suppression of facts” must be construed strictly, it do es not mean any omission and the act must be deliberate and wilful to evade payment of duty.’’
Applying the ratio of the above judgements, we are of the considered opinion that the charges of wilful mis-state ment or suppression of facts against the respondent has not been established.
[8]. Consequently, we direct the authorities to act in accordance with the directions of paragraph 6. We have also held that the notice issued under sub-section (1) of section 74 is not sustainable.
The matter is thus appellant as well as the respondent by delivering certified copy of the same immediately.
