2025 (12) TMI 1121 - HC - GST

Excess GST input tax credit denial u/s16(4) over GSTR-3B mismatch and overlapping demand; 25% deposit ordered, fresh hearing

The dominant issue was whether the demand confirming excess ITC denial under s.16(4) of the GST enactment, premised on non-reconciliation between GSTR-3B ... Excess input tax credit (ITC) claimed on account of non-reconciliation of information declared in GSTR-3B - Invalid ITC under Sec 16(4) - Petitioner failed to reply to SCN - overlapping demand - HELD THAT:- Prima facie, it appears that there is an overlap insofar as the demand confirmed in the impugned order dated 19.02.2025 is concerned - Considering the same, there shall be a direction to the petitioner to deposit 25% of the disputed tax confirmed under Section 16(4) of the respective GST enactment within a period of 30 days together with a reply from the date of receipt of a copy of this order. In case the Petitioner complies with the above stipulations, the first Respondent shall proceed to pass a fresh order on merits and in accordance with law as expeditiously as possible, preferably, within a period of three (3) months of such reply/pre-deposit. Subject to the Petitioner complying with the above stipulations, the attachment of the bank account of the Petitioner shall also stand automatically raised/vacated. Petition disposed off. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the impugned tax demand required interference on the ground of a prima facie 'overlap' between the demand for excess ITC based on non-reconciliation in GSTR-3B and the demand for invalid ITC under Section 16(4). (ii) What conditional relief and consequential directions were warranted, including pre-deposit, opportunity to file reply, reconsideration on merits by the authority, and the status of bank account attachment. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Prima facie overlap between excess ITC demand and Section 16(4) invalid ITC demand Legal framework: The impugned order proceeded, inter alia, on the basis that ITC was ineligible under Section 16(4) for being availed after the prescribed cut-off date, and also on alleged excess ITC arising from non-reconciliation / mismatch in GSTR-3B vis-à-vis supplier declarations. Interpretation and reasoning: The Court considered the submission that part of the demand under one head substantially overlapped with the demand under the other head. On a prima facie assessment, the Court found that such overlap appeared to exist in relation to the demand confirmed in the impugned order, warranting reconsideration rather than allowing the demand to stand as confirmed without the assessee's reply. Conclusions: The Court did not finally adjudicate the correctness of either head of demand, but concluded that the apparent overlap justified setting aside the finality of the impugned confirmation and directing a fresh adjudication on merits, subject to conditions. Issue (ii): Appropriate conditional directions-pre-deposit, fresh adjudication, and bank attachment Legal framework: The Court exercised writ jurisdiction to mould relief by imposing a conditional pre-deposit and directing reconsideration by the tax authority, while also addressing interim recovery measures (bank attachment) based on compliance. Interpretation and reasoning: Noting that the assessee had not filed a reply to the show cause notice despite reminders, the Court balanced the need to safeguard revenue with the need for a proper merits determination in light of the prima facie overlap. The Court therefore required a 25% deposit of the disputed tax confirmed under Section 16(4) within 30 days and submission of a reply, as a condition for reopening the matter for a fresh order on merits. Conclusions: (a) Upon the petitioner making the 25% pre-deposit and filing a reply within 30 days, the authority was directed to pass a fresh order on merits in accordance with law, preferably within three months. (b) On such compliance, the bank account attachment was directed to stand automatically raised/vacated. (c) If the petitioner failed to comply with any stipulation, the authority was permitted to proceed to recover tax in accordance with law as if the writ petition had been dismissed in limine.