Facts of the Case:

In this case, the petitioner challenged the adjudication order dated 30.04.2024 passed under Section 73 of the CGST Act for FY 2018–19. The demand arose on two primary grounds i.e. firstly, petitioner challenged the adjudication order dated 30.04.2024 passed under Section 73 of the CGST Act for FY 2018–19. The demand arose on two primary grounds and Secondly, the petitioner was denied Input Tax Credit (ITC) on the ground that GSTR-3B for March 2019 was filed belatedly (on 13.03.2021), beyond the time limit prescribed under Section 16(4).

The petitioner contended that the mismatch was a bona fide error and should have been allowed to be rectified. It further argued that the denial of ITC was invalid in light of the retrospective insertion of Section 16(5) by the Finance Act, 2024.

Issue:

Whether mismatch between GSTR-1 and GSTR-3B can be treated as admitted liability under Section 75(12) without giving an opportunity of explanation. Whether bona fide errors in GSTR-1 can be rectified beyond prescribed timelines. Whether denial of ITC for delayed filing of GSTR-3B for FY 2018–19 is sustainable in view of newly inserted Section 16(5).

Held That:

The Court on the issue of mismatch, the Court held that although there was an admitted discrepancy between GSTR-1 and GSTR-3B, the department erred in directly invoking the Explanation to Section 75(12) and treating the GSTR-1 liability as final without following due process. The statutory mechanism under Rule 88C of the CGST Rules mandates issuance of intimation (DRC-01B) and an opportunity to explain the discrepancy. Failure to provide such opportunity amounted to violation of principles of natural justice.

The Court further recognized that errors in GSTR-1, especially clerical or bona fide mistakes, are capable of rectification. Relying on the Supreme Court ruling in Central Board of Indirect Taxes and Customs v. Aberdare Technologies Pvt Ltd, the Court emphasized that the right to correct bona fide errors flows from the right to do business and cannot be denied merely due to procedural or system limitations.

Accordingly, the petitioner was granted an opportunity to explain the mismatch with supporting documents, and the authority was directed to reconsider the issue.

On the issue of ITC, the Court held that the denial of ITC was no longer sustainable due to the retrospective insertion of Section 16(5) by the Finance (No. 2) Act, 2024. This provision allows availment of ITC for FY 2017–18 to 2020–21 in returns filed up to 30.11.2021. Since the petitioner filed the return on 13.03.2021, the ITC claim was within the permissible extended timeline.

Thus, the Court categorically held that the petitioner is entitled to ITC for FY 2018–19 and the rejection thereof was legally untenable.

The impugned order was quashed, and the matter was remanded for fresh consideration limited to the mismatch issue after granting proper opportunity.

Case Name:M/s. ITI Ltd. Versus The Union of India Ministry of Finance Dept. Of Revenue New Delhi, GST Council, Central Board of Indirect Taxes And Customs, GST Network, Commissioner/Joint Secretary In The Board Central Board of Indirect Taxes And Customs New Delhi, Assistant Commissioner Dimapur, Nagaland. dated 20.03.2026