The Goods and Services Tax Appellate Tribunal, Bengaluru Bench, in M/s N. R. Builders v. Commissioner of Commercial Taxes, has set aside the adjudication and first appellate orders concerning alleged excess Input Tax Credit arising from a mismatch between FORM GSTR-3B and FORM GSTR-2A. The matter has been remanded to the Proper Officer for fresh adjudication after invoice-wise verification and grant of a proper personal hearing.
The dispute related to FY 2018-19. The Department alleged that the appellant had availed excess ITC of ₹2,33,502, comprising CGST of ₹1,16,751 and SGST of ₹1,16,751. Together with interest of ₹2,03,730 and penalty of ₹23,350, the total demand came to ₹4,60,582.
The appellant contended that the apparent mismatch arose because ITC relating to invoices of FY 2017-18 had been availed during FY 2018-19 within the permissible period under Section 16(4). According to the appellant, the corresponding credit was reflected in the GSTR-2A for FY 2017-18 and, therefore, a year-wise comparison confined to FY 2018-19 created an artificial mismatch.
GSTR-2A Mismatch Requires Proper Verification
The Tribunal held that the disputed credit could not be rejected merely because the relevant invoices did not appear in the GSTR-2A for FY 2018-19 without first examining the appellant’s explanation regarding FY 2017-18 invoices.
It observed that, during the relevant period, GSTR-2A operated as a facilitation tool and that CBIC Circular No. 183/15/2022-GST requires verification rather than summary disallowance in cases involving FY 2017-18 credit claimed in subsequent returns.
The Tribunal therefore found that the assumption that non-reflection in the FY 2018-19 GSTR-2A necessarily established non-payment of tax by suppliers was insufficient without invoice-wise factual verification.
Personal Hearing Mandatory Before Adverse Order
A significant ground on which the proceedings were interfered with was the absence of a personal hearing.
The show cause notice itself recorded the date, time and venue of personal hearing as “NA.” The Tribunal held that Section 75(4) requires an opportunity of hearing where an adverse decision is contemplated, irrespective of whether the taxpayer specifically requests such hearing.
Accordingly, the absence of a personal hearing was held to be an infirmity sufficient in itself to justify setting aside the Order-in-Original.
ASMT-10 Not Mandatory Before Every Section 73 Proceeding
The Tribunal, however, rejected the appellant’s contention that the proceedings were invalid merely because no notice in FORM GST ASMT-10 had been issued.
It held that Sections 61 and 73 operate independently. Where proceedings are directly initiated under Section 73 read with Rule 142 and are not founded upon scrutiny proceedings under Section 61, failure to issue ASMT-10 does not, by itself, invalidate the proceedings.
Thus, this particular issue was decided against the appellant, though it did not cure the defects concerning ITC verification and denial of personal hearing.
Directions on Remand
The Tribunal set aside both the Order-in-Original dated 20 April 2024 and the Order-in-Appeal dated 7 November 2024 and directed de novo adjudication.
The Proper Officer has been directed to verify the appellant’s reconciliation invoice-wise, including the FY 2017-18 GSTR-2A, suppliers’ GSTR-1, ITC register, books of account and GSTR-9/GSTR-9C for FY 2017-18 and FY 2018-19. The officer must also examine whether the disputed ITC was availed within the permissible time under Section 16(4) and apply CBIC Circular No. 183/15/2022-GST to the extent relevant.
A proper personal hearing must be afforded, and a fresh reasoned and speaking order complying with Section 75(6) is to be passed within twelve weeks from communication of the Tribunal’s order.
Importantly, the GSTAT expressly clarified that it had not decided the ultimate admissibility of the disputed ITC. That issue remains open for fresh determination by the Proper Officer. Interest and penalty will consequently depend upon the tax liability determined in the fresh proceedings.
Key Takeaway
The ruling reinforces that a GSTR-3B/GSTR-2A mismatch cannot automatically result in denial of ITC where the taxpayer offers a specific reconciliation requiring factual verification. It also reiterates the mandatory nature of personal hearing under Section 75(4) when an adverse decision is contemplated. At the same time, the Tribunal clarified that ASMT-10 is not a mandatory pre-condition where proceedings are independently initiated under Section 73.