Gauhati HC Permits ITI Ltd to Rectify Mismatch between GSTR-1 and GSTR-3B, Quashes Order For Denying ITC Claim [Read Order]

The Gauhati High Court, Kohima Bench, quashed the order denying Input Tax Credit (ITC) to ITI Ltd and held that the assessee must be permitted to rectify discrepancies between GSTR-1 and GSTR-3B and avail the benefit of Section 16(5) of the Central Goods and Service Tax (CGST) Act,2017.

The petitioner, ITI LTD, is a public sector undertaking in the telecommunications, represented by Kulbushan Shukla challenged the order dated 30.04.2024 passed by the Assistant Commissioner under Section 73 of the CGST Act, where tax demand was raised on account of mismatch between GSTR-1 and GSTR-3B and denial of ITC was beyond the time limit prescribed under Section 16(4).

The Revenue Department treated the excess liability reflected in GSTR-1 as “self-assessed tax” under Section 75(12) and proceeded to recover the same without issuing notice or granting an opportunity to explain the discrepancy.

P. Agarwal, Counsel for the petitioner, contended that GSTR-1 is merely a statement of outward supplies and cannot be treated as conclusive self-assessment. It was further argued that bona fide errors should be permitted to be rectified, relying on judicial precedents affirming the right to correct clerical mistakes.

Z. Kulnu, appeared as counsel for the respondent.

Justice Devashis Baruah noted that under Rule 88C of the CGST Rules, in case of mismatch between GSTR-1 and GSTR-3B, the proper officer is required to issue an intimation and provide the assessee an opportunity either to pay the differential tax or furnish an explanation.

The Court observed that the insertion of Section 16(5) by the Finance Act, 2024, with retrospective effect from 01.07.2017, allows ITC claims for FY 2018-19 if returns were filed up to 30.11.2021. Since the petitioner had filed the return on 13.03.2021, the ITC claim was held to be valid.

The Court held that denial of ITC on the ground of delay was no longer sustainable in view of the retrospective amendment and that substantive rights cannot be defeated by procedural constraints.

Accordingly, the court quashed the impugned order dated 30.04.2024 was quashed.

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