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 [Read Order]

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 writ petitioner challenged the order passed in WPA. The appellant had impugned the order passed by the Assistant Commissioner of State Tax, Ballygunge Charge, the Respondent No. 1 date 20.02.2023 by which the first respondent reversed the input tax credit availed by the appellant under the provisions of West Bengal Goods and Services Tax Act, 2017 (WBGST Act).

The 4th respondent is a supplier of the appellant who provided supply of goods and services to the appellant who had made payment of tax to the fourth respondent at the time of effecting such purchase along with the value of supply of goods/ services.

In some of the invoices of the said supplier was not reflected in the GSTR 2A of the appellant for the Financial Year 2017-18. The first respondent issued notices for recovery of the input tax credit availed by the appellant and the grievance of the appellant is that without conducting any enquiry on the supplier namely, the fourth respondent and without effecting any recovery from the fourth respondent, the first respondent was not justified in proceeding against the appellant.

It was seen that a scrutiny of the return submitted by the appellant was made under Section 61 of the Act for the Financial Year 2017-18 which was followed by a notice dated 03.08.2022 stating that certain discrepancies were noticed.

The appellant filed detailed replies denying the allegations made in the show-cause notice. The show-cause notice was adjudicated and a demand for payment of tax of Rs. 6,50,511/- along with applicable interest and penalty was confirmed under Section 73(10) of the Act.

Mr. Ankit Kanodia assisted by Ms. Megha Agarwal and Mr. Jitesh Sah, Advocates appeared for the appellant and Mr. T.M. Siddique, Government Counsel for the respondent. 

Non-performance or non-operability of Form GSTR-2A or for that matter, other forms will be of no avail because the dispensation stipulated at the relevant time obliged the registered persons to submit return on the basis of such self-assessment in Form GSTR-3B manually on electronic platform.

The show cause notice does not allege that the appellant was not in possession of a tax invoice issued by the supplier registered under the Act. There is no denial of the fact that the appellant has received the goods or services or both. 

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.”

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