Input Tax Credit mismatch reconciliation required before demand; adjudication order set aside for non-compliance with procedure.

An adjudication order raising demand for alleged ineligible Input Tax Credit was challenged for non-compliance with the prescribed procedure for resolving discrepancies between Form GSTR-3B and Form GSTR-2A. The record noted findings of excess ITC availment, including credit linked to non-existing suppliers and Reverse Charge Mechanism entries, but the objection that the reconciliation procedure under Circular No. 183/15/2022-GST dated 27.12.2022 had not been followed was not controverted. In view of the need to permit reconciliation of the mismatch in accordance with the circular, the adjudication required reconsideration, and the consequential demand could not survive once the order was set aside.

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Issues: Whether the adjudication order raising demand on account of alleged ineligible Input Tax Credit, including mismatch between Form GSTR-3B and Form GSTR-2A and other ITC-related discrepancies, was liable to be set aside for non-compliance with the prescribed procedure.

Analysis: The order recorded findings of excess availment of Input Tax Credit, including credit claimed against non-existing suppliers and Reverse Charge Mechanism entries, and raised a demand on that basis. The objection that the prescribed procedure for dealing with discrepancies between Form GSTR-3B and Form GSTR-2A under Circular No. 183/15/2022-GST dated 27.12.2022 had not been followed was not controverted. In view of the need to permit reconciliation of the mismatch in accordance with the circular, the adjudication required reconsideration. Once the adjudication order was set aside, the consequential demand also could not survive.

Conclusion: The adjudication order was set aside and the matter was remitted for reconsideration from the stage of reply to the show cause notice, with permission to reconcile the ITC mismatch in terms of the circular.

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