TaxTMI 
TaxTMI 
2026 (10) TMI 73
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....-9 and GSTR-9C. The Appellant filed a detailed reply with its books of account and reconciliation statements. As the response did not satisfy the proper officer, a show-cause notice (SCN) dated 20.02.2023 was issued under Section 73 (non-fraud proceedings). The SCN alleged: (i) a mismatch between ITC reported in GSTR-3B (Rs. 92,07,676) and GSTR-2A (Rs. 59,76,878), amounting to Rs. 32,30,798; (ii) an outward-tax mismatch between GSTR-1 and GSTR-3B of Rs. 53,00,589; (iii) a turnover variation of Rs. 2,00,097 between GSTR-9 and GSTR-9C; and (iv) a difference between the turnover in the profit and loss account and the turnover in GSTR-9, relating to multiple State GSTINs. 4. The Appellant filed a detailed reply dated 22.02.2023, explaining that ITC of Rs. 34,21,676 pertained to FY 2018-19 and was fully reflected in that year's GSTR-2A. Of this amount Rs. 13,27,071 was availed before 30.09.2019, while Rs. 20,94,605 was availed between October 2019 and March 2020 because the supplier invoices were received late. The Appellant submitted that all conditions under Section 16(2) had been met, that the suppliers had paid the tax to the Government and....
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....ich the credit was availed, which the Appellant submits is addressed by Section 16(5). 3. The Appellant submits that the First Appellate Authority erred in holding that Section 16(5) did not alter the position and in upholding the disallowance under Section 16(4), thereby defeating the purpose of the amendment. b) The Appellant submits that the appellate order travels beyond the SCN, in violation of natural justice. The SCN was issued under Section 73 and did not allege: (i) non-receipt of goods or services; (ii) non-payment of tax by suppliers; (iii) absence of supplier confirmations; (iv) excess ITC of Rs. 27,81,949 based on GSTR-9; or (v) breach of Section 16(2)(b) or Section 16(2)(c). The appellate order nevertheless introduced these grounds, including alleged non-receipt of supplies, non-payment of tax by suppliers, failure to submit a supplier certificate under Circular No. 183, and a fresh calculation of excess ITC of Rs. 27,81,949. The Appellant contends that these grounds were absent from both the SCN and the order under Section 73(9). It submits that this contravenes Section 75(7), the rule that an order cannot t....
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.... penalty under Section 73(9) is not automatic and requires independent reasons, which are absent here. It further submits that the penalty cannot survive if the tax demand itself is set aside. h) The Appellant submits that denying ITC despite valid invoices and payment of tax, solely because of the timing of disclosure, is arbitrary and violates Articles 14 and 300A of the Constitution. It also asserts that ITC, once the substantive entitlement is established, is property protected by Article 300A. 10. Hearings in the matter: 11. The matter was listed on 6 August 2026, with a defect noted in the Vakalatnama. The Appellant was given an opportunity to cure the defect by the next listing on 21 August 2026. At the next hearing, both sides appeared and advanced their final arguments. Shri Sanjay Aggarwal, Authorised Representative, appeared for the Appellant. S/Shri Sanjay Kumar Arya, Shanti Shekhar Singh and Jitendra Pratap Agrahari, and Smt. Vibha Singh, departmental officers of the State GST Department, appeared for the Department. After hearing the parties, the matter was fixed for filing detailed written submissions on 22 September 2026. 12. The Departmental Repre....
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....at Section 16(5) permits ITC to be taken in GSTR-3B but does not validate an incorrect declaration in GSTR-9 or GSTR-9C. The Revenue accordingly submitted that the benefit of Section 16(5) is not automatic and remains subject to the conditions in Section 16(2). 2. d) As to the submission that no certificate was required because the ITC appeared in GSTR-2A, the Revenue contended that this reflection does not prove payment of tax. In this regard Revenue relied on Circular Nos. 183/15/2022-GST dated 27.12.2022 and 193/05/2023-GST dated 17.07.2023. It submitted that, for FY 2017-18 and FY 2018-19, a certificate is required to verify compliance with Section 16(2)(c): where the discrepancy is up to Rs. 5 lakh, a supplier's certificate is required; where it exceeds Rs. 5 lakh, a certificate from a CA/CMA confirming that the supplier deposited the tax is required. As the disputed amount of Rs. 20,94,605 exceeds the Rs. 5 lakh threshold, the Revenue contended that a CA certificate was mandatory, but that the dealer had not submitted one at the assessment stage. 3. e) The Revenue also submitted that the mere reflection of ITC in GSTR-2A does not establish actual receipt....
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.... that the retrospective non-obstante provision expresses Parliament's intent to relieve taxpayers from the Section 16(4) time limit for the initial years of GST. It argued that denying this relief because of the form of disclosure in the annual return would frustrate the purpose of the amendment. d) The Appellant also submitted that an inadvertent or clerical error in the carry-forward columns of GSTR-9 or GSTR-9C is a procedural lapse and cannot override the substantive entitlement expressly conferred by statute. It relied on the principle that a substantive benefit should not be denied for a procedural or technical infraction. e) The Appellant relied on CBIC Circular No. 237/31/2024-GST dated 15.10.2024, which, according to it, directs authorities to give effect to Sections 16(5) and 16(6) in pending proceedings and appeals under Section 107 where a demand was confirmed for contravention of Section 16(4), but the credit is now available under Section 16(5) or (6). As this appeal was pending, the Appellant submitted that the appellate authority was required to apply Section 16(5) and allow the credit. It further submitted that Section 150 of the Finance (No. ....
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....it admittedly appears in GSTR-2A. The Appellant argued that a new basis cannot be introduced at the appellate stage to sustain a demand after Section 16(5) has removed the Section 16(4) time bar. 14. Having considered the submissions of the Appellant and the Revenue, we find that the appeal raises a short but important question about the effect of the retrospective insertion of Section 16(5) of the Central Goods and Services Tax Act, 2017, on a demand based solely on the ground that ITC pertaining to FY 2018-19 was taken after the time limit originally prescribed by Section 16(4). The dispute also requires us to distinguish between three separate events under the GST scheme: (a) availment, or taking, of ITC; (b) utilisation of ITC already availed; and (c) annual disclosure and reconciliation of ITC in GSTR-9 and GSTR-9C. This distinction matters because the First Appellate Authority appears to have treated an alleged discrepancy in the annual return or reconciliation statement as affecting the substantive entitlement to credit already taken through monthly GSTR-3B returns. 15. Questions for Determination 16. The following questions arise for d....
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....e due date for furnishing the details under sub-section (1) of said section for the month of March, 2019. (5) Notwithstanding anything contained in sub-section (4), in respect of an invoice or debit note for supply of goods or services or both pertaining to the Financial Years 2017-18, 2018-19, 2019-20 and 2020-21, the registered personshall be entitled to take input tax credit in any return under section 39 which is filed upto the thirtieth day of November, 2021. (6) Where registration of a registered person is cancelled under section 29 and subsequently the cancellation of registration is revoked by any order, either under section 30 or pursuant to any order made by the Appellate Authority or the Appellate Tribunal or court and where availment of input tax credit in respect of an invoice or debit note was not restricted under sub-section (4) on the date of order of cancellation of registration, the said person shall be entitled to take the input tax credit in respect of such invoice or debit note for supply of goods or services or both, in a return under section 39,-- (i) filed upto thirtieth day of November following the financial year to which such in....
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....ed and appeal has been filed under section 107 of the CGST Act with the Appellate Authority but no order under section 107 of the CGST Act has been issued by the Appellate Authority: In such cases, the Appellate Authority shall take cognizance of sub-section (5) or sub-section (6) of section 16 of the CGST Act, inserted retrospectively with effect from 01.07.2017, and pass appropriate order under section 107 of the CGST Act. 18. Now we take up each issue and hold as below: Issue no. (i): Whether grounds under Section 16(2)(b) or 16(2)(c), not forming the original foundation of demand, can subsequently be introduced to sustain it? The Appellant submits that the appellate order travels beyond the SCN. From perusal of case record it transpires that the SCN was issued under Section 73 and did not allege: (i) nonreceipt of goods or services; (ii) non-payment of tax by suppliers; (iii) absence of supplier confirmations; (iv) excess ITC of Rs. 27,81,949 based on GSTR-9; or (v) breach of Section 16(2)(b) or Section 16(2)(c). The appellate order nevertheless introduced these grounds, including alleged non-receipt of ....
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....a return within the meaning of Section 39, and is preferable to Section 39 read with Rule 61. Hence we find that since ITC was taken by the Appellant in GSTR-3B between October 2019 and March 2020, it therefore satisfies the expression "any return under Section 39" in Section 16(5). Accordingly, we find that submission of Ld AR is not legally sustainable on this point. Issue no. (iii): Is there any legal distinction between availment of ITC and utilisation of ITC? For proper appreciation of the case, it is necessary that we should keep in mind the distinction between taking or availing credit and utilising it, which is central to the present dispute. Section 16 is concerned with entitlement to take ITC. Once eligible credit is claimed through the prescribed return, it is credited to the registered person's Electronic Credit Ledger under Section 49. This is the availment or taking of ITC. Utilisation occurs later, when credit in the Electronic Credit Ledger is debited towards payment of output tax. Reconciliation is the subsequent reporting or comparison of ITC in the annual return, books of account and reconciliation statement. These are distinct even....
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....t may disclose a discrepancy and prompt verification, but it does not, by itself, create, extinguish or recharacterise ITC already taken through GSTR-3B. A contrary interpretation would indirectly restore the restriction that Parliament expressly removed through the retrospective insertion of Section 16(5). Hence we are not in agreement with this argument advanced by Revenue. Issue no. (v): Whether the alleged non-applicability of Notification No. 22/2024-Central Tax defeats the substantive entitlement created by Section 16(5)? The Revenue has argued that the notification relied upon by the Appellant does not apply. That submission proceeds on a misconception about the source of the Appellant's entitlement. Notification No. 22/2024-Central Tax dated 08.10.2024 was issued under Section 148 and provides a special procedure for rectifying orders under Sections 73, 74, 107 and 108 where ITC was denied under Section 16(4) but later became available under Section 16(5) or Section 16(6). That procedure applies where no appeal against the order has been filed. If the Revenue's submission is that the Appellant cannot use the special rectification procedure under No....
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....e more clear once we go through Circular No. 238/32/2024-GST, which provides that after the retrospective insertion of Sections 16(5) and (6), the corresponding amount denied solely under Section 16(4) is no longer payable. (vii) Whether the tax demand and consequential interest and penalty can survive? Now we first consider the impact upon interest. Tax, interest and penalty are distinct fiscal concepts, but whether interest survives depends on the statutory basis for its demand. Section 50(3), in its applicable amended form, provides for interest where ITC has been wrongly availed and utilised. Rule 88B(3) prescribes how such utilisation is to be determined and how interest would be calculated. The statutory premise is that credit was wrongly availed. In the present matter, due to retrospective application of Section 16(5), the credit cannot be treated as wrongly availed. Once that basis disappears, interest under Section 50(3) cannot survive. In Pratibha Processors v. Union of India, (1996) 11 SCC 101, the Supreme Court explained the distinction between tax, penalty and interest and held that interest is compensatory in nature, linked to an amount lega....
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....ectively and overrides the time restriction in Section 16(4) for FY 2018-19. As the disputed credit was taken before 30.11.2021, its denial solely on the former limitation under Section 16(4) is unsustainable. Availment and utilisation are legally distinct: Section 16(5) governs the former and imposes no separate expiry date for subsequent utilisation of credit validly availed. GSTR-9 and GSTR-9C are annual reporting and reconciliation instruments; by themselves, they cannot extinguish credit already taken through a return under Section 39. Notification No. 22/2024 provides a special rectification procedure, and its inapplicability after an appeal has been filed does not negate the substantive right under Section 16(5). Grounds under Section 16(2)(b) or (c), which did not form the basis of the original notice or adjudication, cannot subsequently be introduced to sustain a demand whose original foundation has disappeared. The principal IGST demand of Rs. 20,94,605 is unsustainable. Consequential interest based solely on that demand cannot survive. The penalty of Rs. 2,09,461, being consequential to the same alleged contravention of Section 16(4), is also unsustainable. ORDER 2....