Adjudicator must reconsider ITC entitlement using annual FORM GSTR-9 under Section 44(1), not just GSTR-3B filings

HC held that the adjudicating authority must reconsider the entitlement to ITC by taking into account the annual return filed in FORM GSTR-9 under Section 44(1), including any reconciliation, rather than relying solely on GSTR-3B. The matter is remanded for fresh adjudication; the appellant must establish voluntary payment of Rs.6,20,322 at the time of filing GSTR-9 with supporting documents. Appeal allowed by way of remand.

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1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the retrospective amendment of Rule 61 of the WBGST Rules, 2017, and the omission of Rule 61(6) are constitutional.
• Whether the adjudication order passed by the respondent on 5.6.2023, specifying the amount of tax, interest, and penalty payable by the appellant, is correct.
• Whether the appellant is entitled to claim Input Tax Credit (ITC) as per the reconciliation statement submitted, despite discrepancies between GSTR-3B and GSTR-2A returns.
• Whether the appellant's annual return in FORM GSTR-9 should be considered in determining ITC entitlement, given the non-notification of FORM GSTR-3 for the relevant period.
• Whether the appellant voluntarily paid Rs. 6,20,322.00 as claimed, despite the lack of supporting documentation in the GST BO portal.

2. ISSUE-WISE DETAILED ANALYSIS

Constitutionality of Retrospective Amendment and Omission of Rules:

The appellant initially challenged the constitutional validity of the retrospective amendment of Rule 61 and the omission of Rule 61(6) of the WBGST Rules, 2017. However, during the proceedings, the appellant chose not to press this issue, focusing instead on the correctness of the adjudication order.

Correctness of the Adjudication Order:

The legal framework involves Section 73(9) of the CGST/WBGST Act, 2017, which pertains to the determination of tax, interest, and penalties. The appellant contested the adjudication order, arguing that it was erroneous due to the retrospective amendment of Rule 61 and the omission of Rule 61(6). The Court considered the appellant's submission that the order was incorrect and examined the relevant statutory provisions.

Entitlement to Input Tax Credit (ITC):

The appellant claimed ITC based on a reconciliation statement, which showed discrepancies between amounts in GSTR-3B and GSTR-2A. The adjudicating authority disallowed ITC claims not reflected in GSTR-2A, citing Section 16(4) of the Act. The appellant argued that they rendered services to Indian Railways, which delayed filing returns, affecting ITC claims. The Court noted that the appellant's reconciliation statement was not accepted due to lack of supporting documentation.

Consideration of FORM GSTR-9:

The appellant contended that the non-notification of FORM GSTR-3 for the relevant period prevented them from filing it, and thus, their annual return in FORM GSTR-9 should be considered. The Court analyzed Section 39 and Rule 61, noting that the time limit for filing FORM GSTR-3 was not notified. The Court emphasized that technicalities should not deny lawful ITC entitlement if the appellant complied with statutory conditions. The Court referenced previous cases where GSTR-9 was considered despite discrepancies in GSTR-3B.

Voluntary Payment Claim:

The appellant claimed to have voluntarily paid Rs. 6,20,322.00, but the adjudicating authority found no supporting documentation. The Court noted that the appellant must establish this payment with appropriate evidence, which they claimed to possess.

3. SIGNIFICANT HOLDINGS

The Court held that the matter should be re-adjudicated, emphasizing the importance of considering the appellant's annual return in FORM GSTR-9. The Court stated:

"If the assessee has complied with the requisite conditions under the provisions of the Act and Rules and is lawfully entitled to the input tax credit, the same should not be denied on technicalities."

The Court concluded that the adjudicating authority should not ignore the annual return while considering ITC claims. The Court remanded the matter to the adjudicating authority for fresh consideration, instructing them to examine the appellant's GSTR-9 return and all aspects on merits and in accordance with the law. The decision underscores the principle that taxpayers should not be disadvantaged due to procedural technicalities when statutory forms are not notified.

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