2026 (3) TMI 725 - HC - GST

Input tax credit reconciliation must be allowed with protective terms; ex parte ITC denials remitted for fresh adjudication.

Petitioner challenged ex parte assessment orders denying or quantifying input tax credit due to alleged belated claim and mismatch between GSTR-3B and ... Validity of the impugned ex parte Orders - denied input tax credit without affording the petitioner opportunity to reply and reconcile discrepancies between GSTR-3B and GSTR-2A - reconciliation of returns. Denied input tax credit without affording the petitioner opportunity to reply - HELD THAT:- The Court recorded that the impugned orders were passed ex parte and that the alleged discrepancy between ITC as per GSTR-3B and GSTR-2A is a matter capable of reconciliation by the petitioner through appropriate material. The Authority had rejected the ITC claim in one order on the ground of belated filing and had concluded the other proceeding ex parte on account of excess claim in GSTR-3B vis-a -vis GSTR-2A. In view of the petitioner's undertaking to appear and to demonstrate reconciliation, the Court held that the ex parte orders should be set aside and the matters remitted to permit the petitioner to reply to the show cause notices and make out its case before the Authority. [Paras 6, 7, 8, 9, 10] Impugned ex parte orders set aside and matters remitted for fresh consideration after affording the petitioner opportunity to reply. Remittal for fresh consideration upon furnishing deposit to safeguard revenue - HELD THAT:- The Court accepted the petitioner's undertaking to deposit 10% of the disputed tax in each of the two orders as a condition to ensure no immediate revenue loss. On that basis the Court directed that the matters be remitted to the Authority for adjudication after permitting the petitioner to file its replies and reconcile the alleged discrepancies, and fixed a date for the petitioner to appear before the Authority. The Court kept all contentions open and made the indulgence conditional on compliance with the deposit and attendance directions. [Paras 10, 11, 12, 13] Remand ordered subject to petitioner depositing 10% of the disputed demand in each matter within the time directed and appearing before the Authority on the specified date. Final Conclusion: The High Court set aside the impugned ex parte orders and remitted both matters for fresh consideration after permitting the petitioner to file replies and reconcile the alleged ITC discrepancies, subject to the petitioner depositing 10% of the disputed tax in each matter within the time directed and appearing before the Authority. Issues: Whether the ex parte orders of assessment/adjudication under Section 73 of the KGST/CGST Acts for the financial year 2019-2020 rejecting or quantifying input tax credit (ITC) on grounds of belated claim and discrepancies between GSTR-3B and GSTR-2A should be set aside and the matters remitted for the petitioner to file reply, subject to protective terms to prevent revenue loss.Analysis: The impugned orders were passed ex parte and involve disputed ITC arising from alleged mismatch between ITC shown in GSTR-3B and supplier-uploaded GSTR-2A and from a claim characterised as belated under Section 16(4) of the Karnataka Goods and Services Tax Act, 2017. The petitioner offered to undertake reconciliation by producing supporting material and to make an interim payment to safeguard revenue. Given the reconciliation issue and the petitioner's undertaking to cooperate and to deposit a portion of the disputed demand, it is appropriate to permit a fresh opportunity to reply to the show-cause notices and to decide the ITC claim on merits while ensuring no immediate revenue loss.Conclusion: The ex parte Orders are set aside and the matters remitted to enable the petitioner to file replies and substantiate reconciliation of ITC; the petitioner is placed on terms to appear on the specified date and to satisfy 10% of the disputed demand within three weeks prior to proceeding further, with all contentions kept open.