Complete Case Digest on High Court Rulings on mismatch of GST Returns

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The Goods and Service Tax (GST) Act was launched at midnight on 1st July 2017. The Act aims to make a provision for levy and collection of the tax on intra-state supply of goods or services or both by the central government and for matters connected therewith or incidental thereto. There are basically 13 types of returns to be filed under the GST Act, 2017 and they are GSTR-1, GSTR-3B, GSTR-4, GSTR-5, GSTR-5A, GSTR-6, GSTR-7, GSTR-8, GSTR-9, GSTR-10, GSTR-11, CMP-08, and ITC-04. However, all returns do not apply to all taxpayers.

The mismatch occurs when two things (or amounts) don’t work well together or correspond with each other. There are various possibilities for mismatch in the GST return. Each of these returns filed by the taxpayers is interlinked, among themselves and also with the data provided by those GSTINs which are mentioned in them. Hence when the data received from one taxpayer is compared with the data received from the counterparty, it should be the same. In case it is different then it shall be termed as a mismatch.

Mismatch in  GSTR-1 and GSTR-3B: Kerala HC sets aside Assessment Order under CGST passed without Affording Opportunity of Hearing JOSE PAUL vs STATE TAX OFFICER 2023 TAXSCAN (HC) 1461

The Kerala High Court set aside the assessment order under the Central Goods and Service Tax (CGST) passed without providing an opportunity for a hearing. The assessment order was based on the mismatch found in GSTR -1 and GSTR -3B.

The single-judge bench of Justice Dinesh Kumar Singh allowed the writ petition and set aside the impugned order along with the notice.  The petitioner was directed to appear before the 1st respondent on 29.09.2023 at 11.00 a.m. with all the records in his possession for finalizing the fresh assessment order in accordance with the law.

GST Refund Rejected based on Mismatch without Considering Reconciliation Statement: Delhi HC directs to Reconsider the Matter M/S SHIVBHOLA FILAMENTS PRIVATE LIMITED vs ASSISTANT COMMISSIONER CGST & ANR 2023 TAXSCAN (HC) 1225

In a recent case, the Delhi High Court directed the Goods and Service Authority to reconsider the matter since the GST refund was rejected based on a mismatch without considering the Reconciliation statement.

A division bench comprising Justice Vibhu Bakhru and Justice Amit Mahajan set aside the impugned Order and restored the petitioner’s applications for a refund before the Adjudicating Authority for determining the amount of refund payable to the petitioner after affording the petitioner an opportunity to be heard.

Buyer Complying with Sec 16(2) Conditions Eligible for ITC & Not Liable for GSTR 2A and 3B Mismatch on Seller’s Default, Recovery Targeted at Seller and Not Buyer: Calcutta HC SUNCRAFT ENERGY PRIVATE LIMITED AND ANOTHER vs THE ASSISTANT COMMISSIONER 2023 TAXSCAN (HC) 1206

The High Court of Calcutta has held that the Buyers who comply with the conditions contemplated under Section 16(2) of the Central Goods and Services Tax (CGST) Act and State Goods and Services Tax (SGST) Act, 2017 are eligible to avail Input Tax Credit (ITC) and are not liable for the mismatch or discrepancies in the Goods and Services Tax Return (GSTR) 2A and GSTR 3B due to the default of the seller.

As a result, the appeal is allowed and the orders passed in the writ petition and the order passed by the Assistant Commissioner of State Tax are set aside with a direction to first proceed against the seller before any proceedings can be initiated against the appellant.

Levy of Penalty of 100% of GST Dues in Form GST DRC-07 Invalid: Jharkhand HC quashes SCN and Demand Order Vikash Kumar Singh vs Commissioner of State Tax 2023 TAXSCAN (HC) 620

The Jharkhand High Court has recently quashed the Show Cause Notice ( SCN ) and Demand Order against the assessee as infructuous for the demand of penalty of 100% of Goods and Services Tax ( GST ) dues in the Form GST DRC-07.

The Division Bench of Justice Aparesh Kumar Singh and Justice Deepak Roshan observed that “Levy of the penalty of 100% of tax dues reflected in the Summary of the Order contained in Form GST DRC-07 vide Annexure-4 in the respective writ petitions are also in the teeth of the provisions of Section 73(9) of the Act of 2017, wherein while passing an adjudication order, the Proper Officer can levy penalty up to 10% of tax dues only. The above infirmity clearly shows non-application of mind on the part of the Deputy Commissioner, State Tax, Godda Circle, Godda.” It was further observed that the proceedings also suffer from a violation of principles of natural justice and the procedure prescribed under section 73 of the Goods and Services Tax Act.

GST ITC Denial to Buyer on ground of Default by Seller: Delhi HC to Hear a bunch of Petitions Together BHARTI TELEMEDIA LTD vs UNION OF INDIA & ORS 2023 TAXSCAN (HC) 534

The Delhi High Court is set to hear a bunch of petitions together on the ground of Goods and Service Tax (GST) Input Tax Credit (ITC) Denial to Buyer on ground of Default by Seller. The petitioners have challenged the vires of Section 16(2)(c) of the Central Goods and Services Tax Act, 2017.

The Bench observed that embargo placed under Section 16 (2)(c), qua availment of ITC is akin to condition placed under Section 9(2) (g) of Delhi Value Tax Act, 2004, which was read down to the extent of bona fide purchases in the case of Quest Merchandising India Private Limited vs. Government of NCT of Delhi and affirmed by Supreme Court. The Court listed the matter along with the other pending batch of petitions for hearing on April 19 and the matter is being heard by Justice Rajiv Shakdher and Justice Tara Vitasta Ganju.

Karnataka HC allows changes in GSTR-3B for the months of July 2017 and March 2018 M/S ORIENT TRADERS vs DEPUTY COMMISSIONER OF COMMERCIAL TAXES 2023 TAXSCAN (HC) 291

The High Court (HC) of Karnataka, permits the assessee to make necessary changes to GSTR 3- B for the months of July 2017 and March 2018 since it would not cause any prejudice to Revenue.

A single member Justice S R Krishna Kumar held that the petitioner is entitled to the limited relief of being permitted to make the necessary changes to its GSTR 3-B returns for the months of July 2017 and March 2018, particularly, since doing so would not cause any prejudice to the respondents-Revenue.

Bonafide Mistakes in GSTR-3B can be Rectified as per CBIC Circular: Karnataka HC allows Wipro to Revise GSTR-3B for 3 Years M/S WIPRO LIMITED INDIA vs THE ASSISTANT COMMISSIONER OF CENTRAL TAXES 2023 TAXSCAN (HC) 158

In a major relief to Wipro, the Karnataka High Court has held that the bonafide mistakes in GSTR-3B can be rectified and allowed the Company to revise the return for the last three years permissible under the recent circular issued by the Central Board of Indirect Taxes and Customs (CBIC) as the correction was due to bonafide and inadvertent error in the invoices.

Granting relief to Wipro, the High Court ordered that “Under these circumstances, I am of the considered opinion that it would be just and proper to dispose of this petition directing the respondents 1 to 3 – revenue to follow the procedure prescribed in the Circular and apply the said Circular to the facts of the instant case of the petitioner, 5th respondent and their transactions for the years 2017-18, 2018-19 and 2019-20. It is also necessary to state that though the Circular refers only to the years 2017-18 and 2018-19, since there are identical errors committed by the petitioner not only in respect of the assessment years 2017-18 and 2018-19 but also in relation to the assessment year 2019-20 also, I am of the view that by adopting a justice oriented approach, the petitioner would be entitled to the benefit of the Circular for the year 2019-20 also.”

GST: Non-Communication of Mismatch with Details by Supplier and Dealer is a Mere Technical Breach, Notice cannot be Quashed, rules Madras HC Mahendra Feeds and Foods vs The Deputy Commissioner of GST and Central Excise 2022 TAXSCAN (HC) 457

In a significant ruling, the Madras High Court has upheld the legality of the show cause notice based on mismatch in returns filed by the supplier and the dealer by holding that the same amount to a mere technical breach.

Justice R.Suresh Kumar observed that “after receipt of the show cause notice, if at all the petitioner wants to rectify the mismatch between the petitioner and the supplying dealer, the supporting documents to substantiate that the output tax had been paid by the supplying dealer at their end should have been procured and filed along with the reply submitted by the petitioner, which they failed to do. Therefore, the technical reason that under Section 42(3) it should have been communicated at the earliest point of time and therefore the show cause notice cannot be treated as communication intimating the mismatch between the supplier and the petitioner, cannot be countenanced. Therefore, on that ground, this Court feels that the impugned order cannot be successfully challenged.” Mr. K. Mohana Murali, Senior Panel Counsel appeared for the department.

GST Rules does not Intend to Deny Legitimate Export Incentives: Madras HC grants Relief to Exporter despite Mismatch in Return M/S.Abi Technologies vs The Assistant Commissioner of Customs 2022 TAXSCAN (HC) 434

In a significant ruling, the Madras High Court has allowed a refund claim of the exporter and held that that the strict application of GST rules to deny legitimate export incentives to the exporters would defeat the legislative intent of export incentives.

Allowing the writ petition, the Court held that “If indeed there was an export and a valid debit of tax by the petitioner on the exports made to foreign buyers, the refund shall be granted. The petitioner is also directed to furnish the details to the respondent within a period of 30 days from the date of receipt of a copy of this order. On receipt of the same, the respondent shall consider, verify the same from the counterparts from the customs department and proceed to sanction the refund claim, if the petitioner otherwise is entitled to such refund. It is made clear that procedural infraction shall not come in the legitimate way of grant of refund under the IGST Act, 2017 r/w CGST Act, 2017 and the Rules made thereunder.” Mr.C.Natarajan appeared for the petitioners.

Bombay HC directs GST Authority to Unblock ITC of Rs. 1.17cr availed in its Electronic Credit Ledger after one year of restriction Advent India PE Private Limited vs The Union of India and Ors. 2021 TAXSCAN (HC) 131

The Bombay High Court directed the GST Authority to unblock ITC of Rs. 1.17 Crores availed in its electronic credit ledger after one year of restriction.

It was the submission of Ms. Yadav that said that after the process of verification is complete, the input tax credit would be unblocked. The division bench headed by the Chief Justice Deepankar Dutta and Justice M.S.Karnik noted that having regard to the statutory mandate in sub-rule (3) of rule 86A, the petitioner is entitled to claim that the input tax credit ought to have been unblocked immediately after one year of the restriction being imposed under sub-rule (1) thereof. If indeed the respondents were of the view that the petitioner had not been cooperating with the department, they ought to have proceeded against it in a manner known to law. However, to say that reply is awaited and hence lifting of the restriction has not been resorted to is clearly illegal.

Madras HC upholds levy of Interest under GST on belated Cash Remittance as it is Compensatory, Mandatory F1 Auto Components P ltd vs The State Tax officer 2021 TAXSCAN (HC) 302

The Madras High Court ruled that levy of interest under Goods and Service Tax (GST) on belated cash remittance as it is compensatory and mandatory.

The court held that the levy of interest on belated cash remittance is concerned, it is compensatory and mandatory and the levy is upheld to this extent. As far as the second limb of the levy in respect of remittances by way of adjustment of electronic credit register, the court noted that it was covered by a decision in the case of Maansarovar Motors Private Limited V. The Assistant Commissioner, Poonamallee Division, Chennai, and therefore the levy to this extent was set aside.

Delhi HC issues notice to Govt. in a plea seeking direction for processing of IGST Refund on Account of Export of Goods SYSCHEM INDIA LIMITED vs UNION OF INDIA & ORS 2021 TAXSCAN (HC) 371

The Delhi High Court issued notice to the government in a plea seeking direction for processing of Integrated Goods and Service Tax (IGST) refund on account of export of goods.

The Division bench of Justice Rajiv Shakdher and Justice Talwant Singh directed the issuance of notice on the Government and via all permissible modes including email in respect of processing of IGST refund on account of export of goods along with a plea seeking direction to revenue for payment of due interest from the date of shipping bill. The bench listed the matter on August 04, 2021 as the next date of hearing.

Assessees restricted from availing credit in absence mechanism: Madras HC permits assessee to resubmit corrected annexures to Form GSTR-3B M/S.SUN DYE CHEM vs The Assistant Commissioner 2020 TAXSCAN (HC) 138

The Madras High Court while permitting assessee to resubmit corrected annexures to Form GSTR-3B held that in absence of an enabling mechanism the assessees should not be prejudiced from availing credit that they are entitled to.

Therefore, the court permitted the petitioner to re-submit the annexures to Form GSTR-3B with the correct distribution of credit between IGST, SGST and CGST within a period of 4 weeks from date of uploading of this order and the respondents shall take the same on file and enable the auto-population of the correct details in the GST portal.

Delhi HC directs GST Authority to Open Online Portal to enable Petitioner to File revised declaration TRAN-1 electronically or manually

The High Court of Delhi recently directed the GST Authority to open an online portal to enable Petitioner to file revised declaration TRAN-1 electronically, or manually.

The division bench of Justice Sanjeev Narula and Justice Manmohan directed the Income Tax Authority to open an online portal to enable Petitioner to file revised declaration TRAN-1 electronically, or manually. “The case before us is one where there is a complete lack of understanding and fairness on the part of the Tax Department. The fact that Respondents have done nothing to solve the problem faced by the Petitioner, fueled with the adamant stand before us, contributes to the skepticism of GST technical infrastructure, which we feel should and can be easily avoided. Only if Respondents were to engage with the taxpayers with a genuine intention to solve the problems, confidence in the system can be built up and such matters would not reach courts,” the court while expressing anguish said.

ITC Cannot Be Denied Solely Based on GSTR 2A and 3B Discrepancy: Kerala HC Remits Matter Back for Evidence Examination MINA BAZAR RAILWAY STATION ROAD vs STATE TAX OFFICER 2023 TAXSCAN (HC) 1405

In a recent ruling, the Kerala High Court ruled that Input Tax Credit (ITC) cannot be denied solely based on the discrepancy between GSTR 2A and GSTR 3B. The High Court remitted the matter back for the evidence examination. Mina Bazar Railway Station, the petitioner, has lodged a writ petition challenging both the assessment order and the recovery notice. Upon examination of the assessment order that is under dispute in this current writ petition, it becomes evident that the sole basis cited for the petitioner’s utilization of input tax credit is the variance between GSTR 2A and GSTR 3B.

Furthermore, it was instructed that, subsequent to a thorough review of the evidence presented by the petitioner/assessee, the Assessing Authority should issue new orders in compliance with applicable regulations. The petitioner has been specifically advised to attend a meeting with the Assessing Officer on October 3, 2023, at 11:00 a.m., along with all supporting evidence to substantiate their input tax credit claim.

ITC Cannot Be Denied Based Solely on GSTR 2A and GSTR 3B Discrepancies: Kerala HC directs Readjudication M/S HENNA MEDICALS BUS STAND ROAD vs STATE TAX OFFICERSECOND CIRCLE 2023 TAXSCAN (HC) 1391

The Kerala High Court, based on the Calcutta High Court’s ruling in the case of Suncraft Energy Private Limited v. The Assistant Commissioner, State Tax, Ballygunge Charge, has ruled that, in the GST regime, the assessee cannot be refused the Input Tax Credit simply due to variations between GSTR 2A and GSTR 3B.

Further, directed that the Assessing Authority to issue new orders in compliance with the applicable regulations after examining the submissions. The petitioner is also instructed to attend a meeting with the Assessing Officer on October 3, 2023, at 11:00 a.m., and should bring all supporting evidence for their input tax credit claim.

Demand Notice on Receipt of Service due to Mismatch in GSTR 2A and GSTR 3B ITC is not Valid in Absence of Investigation at End of Supplier: Calcutta HC SUNCRAFT ENERGY PRIVATE LIMITED vs THE ASSISTANT COMMISSIONER 2023 TAXSCAN (HC) 1197

The Calcutta High Court held that the demand notice on receipt of service due to mismatch in Gooda and Service Tax Return (GSTR) 2A and Goods and Service Tax Return (GSTR) 3B Income Tax Credit (ITC) is not valid in absence of investigation at end of supplier.

The Court comprising  Chief Justice T S Sivagnanam and Justice Hiranmay Bhattacharyya has relied on the judgment of the Supreme Court in Bharti Airtel as well as Arise India Ltd and held that “issuance of demand notice on recipient of service on account of mismatch in GSTR 2A and GSTR 3B ITC cannot be sustained without any investigation being done at the end of the supplier whose Invocies are not reflecting in GSTR 2A and that allegation of non-payment of tax by supplier and denial of ITC under section 16(2)(c) of the Act cannot be made without any investigation of the supplier in question.”

No Denial of ITC to Purchaser on Mere Non-Recording of Transaction In GSTR-2A Form: Kerala HC DIYA AGENCIES vs THE STATE TAX OFFICER 2023 TAXSCAN (HC) 1389

In a significant ruling a Single Bench of the Kerala High Court observed that Input Tax Credit (ITC) cannot be denied to a purchaser merely on ground of non-recording of the transaction in the GSTR-2A Form.

The Court of Justice Dinesh Kumar Singh observed that “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.” Advocates Aji V. Dev, H. Abdul Lathief, Alan Priyadarshi Dev, and S. Sajeevan appeared for the petitioner and Government Pleader Jasmine M.M, appeared for the respondents.

GST Amount not Reflecting in GSTR-2A on Non-Uploading of Invoices: Jharkhand HC stays Estern Coalfields from Deducting Amounts from Invoices M/s Tycoons Industries Pvt. Limited vs M/s. Estern Coalfileds Ltd. & Ors 2023 TAXSCAN (HC) 880

The Jharkhand High Court stayed Estern Coalfields, the respondent from deducting amounts from invoices on the ground that GST amount not reflecting in GSTR-2A on non-uploading of invoices.

Rajesh Lala, counsel for the respondent no.1 prayed for and three weeks’ time to file a counter affidavit. A Division bench of the High Court comprising Justices after analysing the facts and the legal provisions ordered for status quo to be maintained by Estern Coalfields thereby not allowing Estern Coalfields to deduct further amounts from future invoices and posted the matter for further consideration on 14.06.2023.

Non-availability of Form GST ITC-02A on GST Portal: Rajasthan HC allows availment of Unutilized ITC through Next GSTR-3B Return Pacific Industries Ltd vs Union Of India, Ministry Of Finance 2022 TAXSCAN (HC) 238

A division bench of the High Court while considering a petition filed due to non-availability of Form GST ITC-02A on the GST Portal, directed the department to allow the assessee-petitioner Input Tax Credit of Rs.2,58,03,590/- through the next GSTR-3B return.

“Hence, the writ petition deserves to be and is hereby allowed in the following terms: “The respondents are directed to regularise the input tax credit in favor of the petitioner as per entitlement. The petitioner shall be allowed to avail the Input Tax Credit of Rs.2,58,03,590/- through the next GSTR-3B return,” the Court concluded.

Rajasthan HC allows availing of ITC in GSTR-3B due to non-availability of FORM GST ITC-02A on GSTN Portal Pacific Industries Ltd vs Union Of India, Ministry Of Finance 2022 TAXSCAN (HC) 238

The Rajasthan High Court allows Assessee to avail Input Tax Credit in GSTR-3B Return due to non-availability of FORM GST ITC-02A on GSTN Portal at the time of its insertion.

The Hon’ble Division Bench headed by Hon’ble Justice Sandeep Mehta and Hon’ble Justice Vinod Kumar Bharwani held that the action of GST Department is grossly illegal, arbitrary, and unjust. Further, the Hon’ble Bench allowed the Petitioner to avail input tax credit through GSTR-3B return and directed the respondent to regularize the input credit as per the entitlement.  “The respondents are directed to regularise the input tax credit in favour of the petitioner as per entitlement. The petitioner shall be allowed to avail the Input Tax Credit of Rs.2,58,03,590/- through the next GSTR-3B return,” the Court ordered.

Major Relief to BALCO: Chhattisgarh HC stays Order denying ITC due to mis-match in Form GSTR-3B with details in Form GSTR-2A M/s. Bharat Aluminium Company limited vs Union of India and others 2021 TAXSCAN (HC) 330

In a major relief to the Bharat Aluminium Company Ltd. (BALCO), the Chhattisgarh High Court stayed order denying Input Tax Credit (ITC) due to mis-match in Form GSTR-3B with details in Form GSTR-2A.

The single judge bench of Justice Gautam Bhaduri while listing the matter in the week commencing August 02, 2021, granted stay on recovery and restrains Revenue to take coercive steps on assessee depositing 5% of demand within 15 days.

Mismatch in Tax Returns and Short-payment of GST: Dept started sending Notices to Companies

The GST Department has started sending notices to the Companies asking them to explain the reason for “discrepancies” in return GSTR-3B and GSTR-1.

GST, the new indirect tax law was rolled out on 1st July last year. However, till January, the revenue numbers were very poor. According to a report in Financial Express, the data analysis showed only 16 per cent of the summary sales returns under GST matched with the final returns till December 2017. It also showed that there was excess tax payment of Rs 91,072 crore by 49.36 per cent of businesses registered under GST between July-December.

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