Wrong Input Tax Credit classification and recovery notices challenged after rectification via GSTR-9C; recovery quashed accordingly.

Wrong entries in GSTR-3B concerning Input Tax Credit were rectified by filing GSTR-9 and GSTR-9C, and therefore subsequent recovery notices based on alleged short payment or excess ITC claim were unsustainable; the rectification removed any question of actual utilization of unavailable ITC. Misclassification of IGST as CGST and SGST resulted only in excess claim on paper, not in revenue loss because the excess ITC remained with the government and was not availed; consequently, recovery demands premised on revenue loss and failure to reverse excess ITC could not be sustained and the impugned order is liable to be quashed.

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Issues: Whether the assessment/order dated 09.12.2024 (DRC-01A/DRC-01) is sustainable where the registered person had rectified wrongful ITC entries in GSTR-9/GSTR-9C and the officer had earlier issued ASMT-12 accepting the explanation under Section 61(2) of the Central Goods and Services Tax Act, 2017.

Analysis: The petitioner had mistakenly reported ITC under CGST and SGST instead of IGST in GSTR-3B for 2018-19 and subsequently disclosed and rectified the error in GSTR-9 and GSTR-9C. An assessment notice (ASMT-10) was issued and, after the explanation was found acceptable, ASMT-12 was issued dropping proceedings. Section 61(2) provides that where the explanation is found acceptable the registered person shall be informed and no further action shall be taken. Despite issuance of ASMT-12, DRC-01A and DRC-01 were later issued for the same matter. The rectification by filing GSTR-9/GSTR-9C removed the basis for alleging short payment or revenue loss, and issuing recovery notices after ASMT-12 was barred by the statutory provision.

Conclusion: The assessment/recovery notices issued after ASMT-12 are not sustainable and the impugned assessment order dated 09.12.2024 is quashed; decision is in favour of the petitioner (assessee).

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