Input tax credit mismatch cannot by itself justify denial where imports and SEZ procurements were not reflected in GSTR-2A.

Input tax credit could not be denied merely because credits appeared in GSTR-3B but not in GSTR-2A where the disputed entries related to imports and SEZ procurements that were not reflected in GSTR-2A by system design, and the reporting error was supported by the record and later corrected in the annual return. The Karnataka HC set aside the demand, interest and penalty on that count. On the remaining issues, including corporate guarantee, cross-charges, ineligible input tax credit, merchant export rate, refund, reverse charge on import of services, and doctor consulting or patient counseling, the Court found the adjudication incomplete and remanded the matter for fresh consideration.

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Issues: (i) Whether the demand confirmed towards alleged excess availment and utilisation of input tax credit on account of mismatch between GSTR-3B and GSTR-2A was sustainable. (ii) Whether the findings on the remaining issues, including corporate guarantee, cross-charges, ineligible input tax credit, merchant export rate, refund, reverse charge on import of services, and doctor consulting or patient counseling, could be sustained or required reconsideration.

Issue (i): Whether the demand confirmed towards alleged excess availment and utilisation of input tax credit on account of mismatch between GSTR-3B and GSTR-2A was sustainable.

Analysis: The demand rested on the premise that credits appearing in GSTR-3B but not in GSTR-2A were inadmissible. The petitioner demonstrated that the disputed credits related to imports and SEZ procurements, which were not reflected in GSTR-2A for the relevant period by system design. It was also shown that the entries were reported under the wrong table in GSTR-3B and were subsequently corrected in the annual return. The Court accepted that denial of credit on this basis was erroneous on the material before the authority.

Conclusion: The finding of excess input tax credit was unsustainable and the demand, interest, and penalty on that count were set aside.

Issue (ii): Whether the findings on the remaining issues, including corporate guarantee, cross-charges, ineligible input tax credit, merchant export rate, refund, reverse charge on import of services, and doctor consulting or patient counseling, could be sustained or required reconsideration.

Analysis: The impugned order on these issues was found to have been passed without proper consideration of the relevant statutory provisions, circulars, notifications, and the petitioner's submissions. To afford one more opportunity for adjudication, the matter was sent back for fresh consideration on these remaining issues.

Conclusion: The findings on the remaining issues were set aside and remanded for reconsideration afresh.

Final Conclusion: The petition succeeded in part, with the confirmed ITC demand annulled and the remaining disputed issues restored to the adjudicating authority for fresh decision.

Ratio Decidendi: Where disputed input tax credit relates to imports or SEZ procurements not reflected in GSTR-2A for the relevant period by system design, and the reporting error is otherwise supported by the record, the credit cannot be denied merely on that mismatch; where the adjudication is incomplete on other disputed heads, remand for fresh consideration is appropriate.

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