GST TRAN-1, TRAN-2 Rejected due to Input Quantity/Value Mismatch: Karnataka HC Orders Fresh Scrutiny of Documents [Read Order]

The Karnataka High Court recently dealt with a case where transitional input tax credit claims through Forms TRAN-1 and TRAN-2 were rejected on the basis of mismatches in the quantity and value of inputs. The High Court set aside the impugned orders and ordered fresh scrutiny of new documents produced by the assessee

M/s Bhawar Life Style filed two writ petitions challenging two Orders-in-Original passed by the Assistant Commissioner of Central Tax, Bengaluru South Division-3 which rejected transitional credit claims for the period from July 2017 to March 2022.

In the order pertaining to TRAN-1, the adjudicating authority had observed that the quantity and value of inputs declared by the assessee did not match the transitional credit claimed. It was also noted that the assessee had not maintained a detailed stock register reflecting the description, quantity and value of goods held in stock.

The authority thus concluded that the credit claimed was irregular and confirmed the demand against the assessee.

With regards to the TRAN-2 claim, the authority observed that the taxpayer had failed to furnish details of inputs held in stock as on 1 July 2017 and had not produced invoices or documents evidencing payment of tax in support of the credit that had been carried forward to the electronic credit ledger.

During a prior hearing held on 04.02.2026, the High Court directed that the petitioner appear before the adjudicating authority and produce additional records including supporting documents relating to the stock and transactions.

The authority had also called upon the assessee to furnish further materials such as a CA-certified closing stock as of 30 June 2017, copies of purchase invoices and the sales register for the period July to December 2017.

During the instant hearing, E.I.Sanmathi for the petitioner submitted that he had appeared before the authority on 25.02.2026; the documents produced before the assessing officer and minutes of the proceedings were also furnished before the High Court.

Justice S. Sunil Dutt Yadav noted that the earlier orders had been passed by the adjudicating authority in the absence of certain documents that were not available, but had been subsequently presented, and deemed it appropriate to set aside the impugned order and remit the matter for reconsideration.

Accordingly, the impugned GST orders were set aside and the matters were remanded for fresh adjudication.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates