2022 (5) TMI 1237 - HC - GST

Input Tax Credit Denied Due to Supplier-Recipient Mismatch Under GST Act Section 42(3)

The HC dismissed a GST dealer's petition challenging an order reversing Input Tax Credit (ITC) due to mismatches between supplier and recipient records. ... Validity of SCN - Denial of Input Tax Credit - complete mismatch between the supplier and the petitioner - mismatch rectified or not - Section 42(3) of the GST Act - HELD 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. This Court is not inclined to entertain this writ petition and it is liable to be dismissed - Petition dismissed. Issues:Challenge to order-in-original regarding Input Tax Credit (ITC) mismatch and procedural violation under GST Act Section 42(3).Analysis:The petitioner, a GST dealer, availed ITC for FY 2017-18 and 2018-19, but faced a challenge from Revenue due to a mismatch between the supplier and the petitioner in ITC claims. A show cause notice was issued and replied to, leading to the order-in-original dated 30.03.2022.The petitioner argued a procedural violation under Section 42(3) of the GST Act, claiming the Revenue failed to communicate the mismatch to both supplier and dealer. The absence of early communication and reliance on the show cause notice were highlighted as grounds for challenging the order.The Revenue contended that the show cause notice itself served as communication under Section 42(3), and the onus was on the petitioner to rectify the mismatch by providing substantiated documents. The lack of such documentation led to the reversal of ITC claimed by the petitioner in the impugned order.The Court acknowledged both sides' arguments but sided with the Revenue, emphasizing that the petitioner had the opportunity to rectify the mismatch upon receiving the show cause notice. The failure to provide supporting documents to show the supplier's tax payment led to the dismissal of the writ petition.Ultimately, the Court dismissed the writ petition but granted liberty to challenge the impugned order before the appellate authority. No costs were awarded, and the connected miscellaneous petition was also dismissed.