Facts of the Case:

In this case, the appellant engaged in manufacture of spring washers and other engineering products, challenged the demand relating to alleged excess ITC for FY 2019-20. During scrutiny, the Department noticed a difference between ITC reported in GSTR-3B and the corresponding figures appearing in GSTR-2A. The taxpayer furnished a reconciliation, which primarily disclosed an excess IGST credit of ₹82,701, while CGST and SGST reflected a shortfall of ₹1,745 each.

Although the DRC-01A and SCN dated 29.05.2024 proposed liability under the IGST head, the adjudicating authority ultimately confirmed CGST and SGST of ₹25,587 each, along with interest and penalty, based on a different working relating to alleged carry-forward/adjustment of earlier-year ITC. The first appellate authority upheld the demand, principally relying upon the GSTR-2A mismatch and absence of supplier certificates contemplated under CBIC Circulars 183/2022 and 193/2023.

Issue:

Whether ITC can be denied merely on the basis of difference between GSTR-2A and GSTR-3B, without proper verification of invoices, books, reconciliation and supplier compliance; and whether a demand under CGST/SGST, which was not proposed in the SCN, could validly be confirmed by the adjudicating authority.

Held That:

The GSTAT set aside the adjudication and first appellate orders and remanded the matter for fresh adjudication. It held that a difference between GSTR-2A and GSTR-3B may provide a basis for initiating verification proceedings, but the mismatch by itself cannot be treated as conclusive evidence of wrongful availment of ITC. The Department was required to examine the underlying invoices, books, electronic credit ledger, reconciliation and, where necessary, supplier-wise compliance before determining the eligibility of credit.

The Tribunal further found a material infirmity in the proceedings because the SCN proposed liability under IGST, whereas the final demand was confirmed under CGST and SGST on the basis of a different working. Such a change could not be sustained without the taxpayer being specifically confronted with the proposed CGST/SGST liability. Section 75(7) prohibits confirmation of an amount or on grounds different from those specified in the notice. The Tribunal also noted that the adjudicating and appellate authorities had failed to properly deal with the taxpayer’s reconciliation and had not passed a reasoned order as required under Section 75(6).

On the statutory framework, the Tribunal observed that Section 16(2)(aa) was introduced only with effect from 01.01.2022 and therefore could not be applied to FY 2019-20. For the relevant period, GSTR-2A was primarily a facilitative/auto-populated statement and a mismatch therein, without further verification, could not conclusively establish violation of Section 16(2)(c). The Tribunal also clarified the limited temporal applicability of Circulars 183/2022 and 193/2023.

Accordingly, the matter was remanded strictly within the scope of the original SCN. The adjudicating authority was directed to reconcile the competing workings, verify the source of GSTR-2A figures, undertake invoice-wise/supplier-wise verification, examine the relevant books and records, apply the provisions applicable to FY 2019-20, provide reasonable opportunity and personal hearing, and pass a fresh reasoned order. The Tribunal expressly left the ultimate admissibility of ITC open.

Case Name: M/s Peekay Industries Versus Commissioner of Commercial Taxes, Karnataka dated 03.09.2026

Citation No. 2026 Taxo.online 2644