TaxTMI 
TaxTMI 
2026 (9) TMI 454
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....ahadevapura Post, Bengaluru Urban, Karnataka - 560048. 2. This appeal challenges the Order-in-Appeal bearing GST.AP. No.877/24-25 dated 15.11.2025. That order was passed by the Joint Commissioner of Commercial Taxes (Appeals-5), Koramangala, Bengaluru ("the First Appellate Authority"), under Section 107 of the CGST/KGST Act. The First Appellate Authority dismissed the Appellant's first appeal. It affirmed the order dated 30.07.2024 (Form GST DRC-07, uploaded 28.08.2024), passed under Section 73(9) of the CGST/KGST Act by the Commercial Tax Officer (LGSTO)-036, DGSTO-5, Bengaluru ("the Adjudicating Authority"). 3. This dispute relates to the tax periods from April 2019 to March 2020. The Revenue alleges that the Appellant availed excess Input Tax Credit ("ITC"). The alleged excess arises from a difference between the credit shown in FORM GSTR-2A and the credit availed by the Appellant in FORM GSTR-3B. 4. According to the Revenue, the Appellant wrongly availed ITC of Rs. 51,174/- (CGST Rs. 25,587/- and SGST Rs. 25,587/-). This amount is sought to be recovered under Section 73, along with interest under Section 50 and penalty. 5. The Appellant disputes this. It contends th....
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.... notice in FORM GST DRC-01 dated 29.05.2024, issued under Section 73(1) read with Rules 100(2) and 142(1)(a) of the CGST/KGST Rules, 2017 vide assignment No.2535/2019-20 dated 15.05.2024. We record here, as this is central to the controversy before us, that both FORM GST DRC-01A (proposing tax of Rs. 82,701/- with interest of Rs. 61,571/-, aggregating Rs. 1,44,273/-) and FORM GST DRC-01 (proposing tax of Rs. 82,701/- with interest of Rs. 62,026/- and penalty of Rs. 10,000/-, aggregating Rs. 1,54,727/-) continued to quantify the entire proposed liability under the IGST head alone, exactly as in the ASMT-10. At no stage prior to the adjudication order was the Appellant put to notice of any proposed liability under the CGST or SGST heads. 8.2 The Appellant filed objections to the show-cause notice. It reiterated that valid tax invoices were available, that the goods had actually been received, and that payment had been made to the suppliers. It also reiterated that there was no excess claim under the CGST and SGST heads, and that any difference related only to the IGST head and stood duly reconciled. 8.3 Despite these objections, the Adjudicating Authority passed the order in FO....
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.... Total ITC auto-drafted in GSTR-2A (Apr-19 to Mar-20) 4,42,640 1,54,402 1,54,402 Shortfall (-) / Excess (+) [GSTR-3B minus GSTR-2A] (+) 82,701 (-) 1,745 (-) 1,745 9.2 On the strength of this very primary reconciliation, the liability proposed at every stage prior to adjudication - in FORM GST DRC-01A dated 15.05.2024 (tax Rs. 82,701/-, interest Rs. 61,571/-, aggregating Rs. 1,44,273/-) and in the show-cause notice in FORM GST DRC-01 dated 29.05.2024 (tax Rs. 82,701/-, interest recomputed as Rs. 62,026/-, plus proposed penalty of Rs. 10,000/-, aggregating Rs. 1,54,727/-) - was confined entirely to the IGST head. 9.3 FORM GST DRC-07 records the following working under the heading "Excess of 2018-19 claimed in 2019-20", describing it as the Appellant's reply. We reproduce it exactly as it appears in the order, without independently verifying its arithmetic, for reasons explained in our analysis at Issue No. 3 below. We record here a factual discrepancy material to this appeal: on a plain reading of the Appellant's actual letter dated 30.03.2024 (filed on record in response to the ASMT-10), that letter is expressly captioned as, and confined to, a "Reconcili....
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....yse or discuss the reconciliation furnished by the Appellant in response to the ASMT-10 notice. Nor does it give reasons for departing from the primary reconciliation in favour of the "Net Excess Claim" working. 10.4 We record two further, and more fundamental, infirmities. First, the tax proposed at every prior stage - ASMT-10, DRC-01A and the show-cause notice in DRC-01 - was, without exception, confined to the IGST head; the CGST and SGST demand of Rs. 25,587/- each, which the order ultimately confirms, was never put to the Appellant by way of any notice before the adjudication order itself was passed. Second, the order attributes the "Excess of 2018-19 claimed in 2019-20" working - the very working from which the confirmed CGST/SGST demand is drawn - to the Appellant's own reply. On a plain reading of the Appellant's letter dated 30.03.2024, however, that letter reconciles only the IGST head; it contains no CGST or SGST reconciliation at all. The order does not explain the source of the CGST/SGST figures it treats as the Appellant's reply, nor does it explain how a demand outside the scope of the show-cause notice came to be confirmed. E. Findings Recorded by the First Ap....
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....cation order, the Proper Officer shifted the demand to the CGST and SGST heads, without giving reasons and without verification. This violates the settled principle that an assessee cannot be fastened with liability on a factual basis different from what was stated in the notice. 12.3 The assumption that ITC pertaining to Financial Year 2018-19 had been adjusted in Financial Year 2019-20 is not supported by any documentary evidence. It is based on conjecture. Neither the books of account, nor the electronic credit ledger, nor the purchase registers were examined before this conclusion was drawn. 12.4 FORM GSTR-2A is only a facilitative, auto-generated statement. It cannot by itself be conclusive evidence of wrongful availment. The reconciliation, invoices, books of account, and proof of receipt of goods ought to have been examined before any adverse conclusion was recorded. 12.5 The authorities have mechanically invoked Section 16(2)(c), without recording any finding that the suppliers had, in fact, failed to discharge their tax liability. The CBIC Circulars relied upon merely prescribe a verification procedure. They cannot override the substantive provisions of the Act, a....
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....tative for the Appellant and the learned Departmental Representative for the Respondents. We have examined the record, the pleadings, the statutory provisions, and the judicial precedents cited before us. The following issues arise for our determination: (i). Whether the proceedings initiated, and the demand confirmed, under Section 73 of the CGST/KGST Act are sustainable in law and on facts? (ii). Whether a mere difference between the ITC reflected in FORM GSTR-2A and the ITC availed in FORM GSTR-3B, without independent verification of the underlying transactions, constitutes sufficient legal basis for denial of ITC? (iii). Whether the Adjudicating Authority and the First Appellate Authority correctly appreciated the reconciliation statement and other documentary evidence produced by the Appellant, including the internal inconsistency between the primary reconciliation and the "Net Excess Claim" working actually used to confirm the demand? (iv). Whether Section 16(2)(c) of the CGST Act has been correctly interpreted and applied by the authorities below, having regard also to Section 16(2)(aa) and Rule 36(4) as they stood (or did not stand) durin....
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....nd FORM GSTR-3B was, by itself, sufficient material to initiate proceedings under Section 73. It is further submitted that payment of tax by the supplier is a condition for availment of ITC under Section 16(2)(c), and that the Appellant had in any event not furnished the certificates contemplated under CBIC Circular No. 183/15/2022-GST and Circular No. 193/05/2023-GST. Tribunal's Analysis: 16.1.3 We have examined the reconciliation and the successive computations appearing in the order of the Adjudicating Authority, set out in tabular form at Part C above. The primary reconciliation for Financial Year 2019-20 (Para 9.1) shows an excess of Rs. 82,701/- under IGST, and a difference of Rs. 1,745/- each under CGST and SGST - in the Appellant's favour, not against it. It was this IGST figure alone that formed the basis of the amount initially proposed in FORM DRC-01A. The final demand, however, was not confirmed under IGST at all. It was confirmed under CGST and SGST, at Rs. 25,587/- each, drawn from an entirely different working described in the order as "Excess of 2018-19 claimed in 2019-20" (Para 9.3). The Adjudicating Authority has nowhere explained why the primary reconciliat....
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...., and we do not depart from it. But that decision does not decide the question before us, which is not one of limitation but of proof: whether a difference in GSTR-2A, by itself, establishes that the supplier has not paid the tax. The authorities below have proceeded substantially on that assumption, without any finding based on an enquiry into the concerned suppliers or their tax payments, and without properly examining the Appellant's reconciliation. We take note also of State of Karnataka v. Ecom Gill Coffee Trading Private Limited (2023) 9 SCC 573 where the Hon'ble Supreme Court emphasised that determination of ITC eligibility may require examination of the underlying transactions and supporting material, and cannot always be decided merely on production of invoices. That case arose under the Karnataka VAT Act, on facts where the genuineness of the transactions themselves was in question - a different controversy from the one before us. We do not apply it as if it decided the precise GSTR-2A/GSTR-3B question; we refer to it only for the limited proposition that determination of ITC can require examination of the underlying records. Finding: 16.2.4 A difference between GST....
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....use notice, sits uneasily with this requirement. 16.3.5 The First Appellate Authority did not deal with this at all. The impugned Order-in-Appeal does not consider the primary reconciliation, nor the inconsistency between it and the working that actually produced the confirmed demand. This is not a minor omission - the second computation is the very basis of the tax demand of Rs. 51,174/-. As the Hon'ble Supreme Court held in Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan, (2010) 9 SCC 496, the reason for a quasi-judicial decision must be apparent from the order itself. Here, the two computations have not been reconciled, and the reason for adopting one over the other has not been given. We also note the Appellant's own submission that the discrepancy first noticed related only to the IGST head, and that the shift to CGST and SGST at adjudication was made without reasons or verification. Finding: 16.3.6 Neither the reconciliation furnished by the Appellant, nor the internal inconsistency between the two computations on record, has been properly considered by the authorities below. More than that: the CGST/SGST working which FORM GST DRC-07 attributes to the Appellant's r....
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....rent graded form. Neither authority below appears to have considered this timeline. Finding: 16.4.5 On proper verification, the authorities below have not established that the condition in Section 16(2)(c) was breached by the Appellant. Section 16(2)(aa) has no application to Financial Year 2019-20. Issue No. (v) - Whether CBIC Circular No. 183/15/2022-GST and Circular No. 193/05/2023-GST were correctly applied? Tribunal's Analysis: 16.5.1 Circular No. 183/15/2022-GST relates, by its own terms, to Financial Years 2017-18 and 2018-19. Circular No. 193/05/2023-GST extends the same verification mechanism only to the period April 2019 to 8th October 2019 - because Rule 36(4) came into force only from 09.10.2019. The present dispute spans April 2019 to March 2020, a materially wider period. The period 9^th October 2019 to March 2020 cannot be brought within Circular No. 183/15/2022-GST as extended by Circular No. 193/05/2023-GST merely because the appeal, as framed, concerns the financial year as a whole. Neither authority below has separately examined these two periods. The fact that the Appellant did not furnish the certificates contemplated by these Circulars may well ....
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....t Excess Claim" working lead to different results, and that neither the Adjudicating Authority nor the First Appellate Authority has explained the difference. Section 75(6) casts a mandatory obligation on the Proper Officer to set out the relevant facts and the basis of the decision in every order passed under Section 73. The requirement of giving reasons has been explained by the Hon'ble Supreme Court in Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan. Reasons are necessary so that the affected party, and the appellate forum, can understand how the conclusion was reached. In the present case, the absence of reasons is not confined to some subsidiary matter - it concerns the very computation of the tax demanded. Finding: 16.7.4 The impugned orders do not contain adequate reasons for the computation and confirmation of the demand. They do not meet the requirement of a reasoned, speaking order under Section 75(6) of the CGST Act. Issue No. (viii) - What relief should be granted to the Appellant? Tribunal's Analysis: 16.8.1 The findings recorded above leave us with a single question: should this Tribunal itself determine the correct amount of ITC, or should the matter ....
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...., and the matter is remanded to the Adjudicating Authority for fresh, reasoned adjudication in accordance with law, on the terms set out in the Operative Order below. J. Operative Order For the reasons discussed above, the appeal is disposed of by way of remand to the Adjudicating Authority on the following terms: (i) The order dated 30.07.2024 (FORM GST DRC-07) passed by the Commercial Tax Officer (LGSTO)-036, DGSTO-5, Bengaluru; and (ii) The Order-in-Appeal No. GST.AP. 877/24-25 dated 15.11.2025 passed by the Joint Commissioner of Commercial Taxes (Appeals-5), Koramangala, Bengaluru, are set aside. (iii) The matter is remanded to the Adjudicating Authority for fresh adjudication, strictly confined to the show cause notice in FORM GST DRC-01 dated 29.05.2024. This is not a de novo remand at large. It is not an opportunity to reopen or expand the case. Specifically, the Adjudicating Authority shall not travel beyond the heads (IGST, CGST or SGST) and grounds set out in that notice or confirm, or propose to confirm, any tax, interest or penalty exceeding the amount specified in that notice, under any head or on any ground whatsoever. (iv) Th....