2026-VIL-150-GSTAT-GZB
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SGST Tribunal

GST - Demand beyond show cause notice - Section 75(7) of CGST Act, 2017 - Original disallowance of ITC based only on the time limit under Section 16(4) - First Appellate Authority introduced grounds of non-receipt of supplies and non-payment of tax by suppliers under Section 16(2)(b) and 16(2)(c) - Whether grounds not forming the original foundation of the demand can subsequently be introduced to sustain it - HELD - The show cause notice under Section 73 did not allege non-receipt of goods or services, non-payment of tax by suppliers or breach of Section 16(2)(b) or (c), and the Order-in-Original contains no independent finding on them - Section 75(7) provides that no demand shall be confirmed on grounds other than those specified in the notice, and relying on SACI Allied Products, a demand cannot be sustained on a new and different basis. ITC is a statutory entitlement subject to conditions, but the Revenue cannot rely on that principle to enforce a time limit that Parliament has retrospectively displaced. This does not mean that Section 16(5) cures substantive ineligibility, since allegations of fake invoices, non-receipt of supplies or blocked credit may be raised, proved and adjudicated in accordance with law - Grounds under Section 16(2)(b) or 16(2)(c) not forming the original basis cannot be introduced to sustain the demand - ITC pertaining to 2018-19 taken in GSTR-3B - Section 16(5) of CGST Act, 2017 - Revenue contended that credit was claimed through GSTR-3B and not in a return under Section 39 - Whether GSTR-3B constitutes a return under Section 39 for purposes of Section 16(5) - HELD - In Union of India v. Bharti Airtel, the Supreme Court held that GSTR-3B, although introduced as a stopgap arrangement, is treated as a return within the meaning of Section 39. ITC taken by the Appellant in GSTR-3B between October 2019 and March 2020 therefore satisfies the expression any return under Section 39 in Section 16(5) - The submission of the Revenue is not legally sustainable - Availment and utilisation of ITC - Sections 16 and 49 of CGST Act, 2017 - Whether there is any legal distinction between availment of ITC and utilisation of ITC - HELD - Section 16 is concerned with entitlement to take ITC. Once eligible credit is claimed through the prescribed return, it is credited to the Electronic Credit Ledger, which is availment. Utilisation occurs later when the ledger is debited towards payment of output tax. Reconciliation is the subsequent reporting or comparison of ITC in the annual return, books and reconciliation statement. These are distinct events and are not interchangeable - Section 16(4) regulates the time for taking credit, and Section 16(5) retrospectively extends that period for specified financial years. Neither provision requires credit validly taken within the permitted period to be utilised within the same period. Relying on Bharti Airtel and Dai Ichi Karkaria, which distinguish earning credit from using it: Once the credit was taken within the period permitted by Section 16(5), its subsequent utilisation cannot be treated as delayed availment - Disclosure in GSTR-9 and GSTR-9C - Section 16(5) of CGST Act, 2017 - Revenue contended that ITC was not disclosed as carry-forward in the annual return and reconciliation statement - Whether non-carry-forward or incorrect disclosure in GSTR-9 or GSTR-9C can defeat ITC already taken through a Section 39 return - HELD - GSTR-9 is an annual return and GSTR-9C is a reconciliation statement, and neither is the return under Section 39 through which the credit was taken. Section 16(5) does not make entitlement conditional upon correct disclosure in a particular column of GSTR-9, correct carry-forward in GSTR-9C, or absence of an annual reconciliation discrepancy. The statutory condition is that the ITC be taken through a return under Section 39 filed by 30.11.2021. A subsequent error in annual reconciliation cannot convert credit already availed into credit not availed. An annual return may disclose a discrepancy and prompt verification, but it does not create, extinguish or recharacterise ITC already taken. A contrary interpretation would indirectly restore the restriction that Parliament expressly removed - The reasoning of the FAA cannot prevail over the plain language of Section 16(5) - Notification No. 22/2024-Central Tax - Rectification procedure - Section 16(5) of CGST Act, 2017 - Revenue contended that the notification relied upon by the Appellant does not apply - Whether the alleged non-applicability of the notification defeats the substantive entitlement created by Section 16(5) - HELD - The notification issued under Section 148 provides a special procedure for rectifying orders where ITC was denied under Section 16(4) but later became available under Section 16(5) or (6), and applies where no appeal against the order has been filed. It may be correct that the Appellant cannot use that procedure because an appeal was filed. That does not make Section 16(5) inapplicable. The notification does not create entitlement, which flows directly from Section 16(5) introduced retrospectively by Parliament. The Revenue conflates the procedural remedy with the substantive entitlement. Circular 237/31/2024-GST directs authorities to give effect to Section 16(5) and (6) in pending proceedings and appeals - The right accrued under Section 16(5) is not neutralised - ITC of 2018-19 taken through GSTR-3B during October 2019 to March 2020 - Retrospective Section 16(5) of CGST Act, 2017 overriding Section 16(4) - Demand under Section 73 on the ground that ITC was taken after the time limit - Whether such ITC is protected by retrospective Section 16(5) - HELD - The disputed credit was taken through GSTR-3B returns filed well before 30.11.2021 and falls within the language of Section 16(5), which permits ITC pertaining to 2018-19 to be taken in any return under Section 39 filed up to 30.11.2021. Denial under Section 16(4) cannot survive once Section 16(5) is inserted. Circular 238/32/2024-GST provides that the amount denied solely under Section 16(4) is no longer payable - The foundation for the demand under Section 73 disappears, the denial of ITC is set aside and the demand is quashed - Interest and penalty consequent to demand of ITC - Section 50(3), Rule 88B(3) and Section 73(9) of CGST Act, 2017 - Whether the tax demand and consequential interest and penalty can survive - HELD - Section 50(3) provides for interest where ITC has been wrongly availed and utilised. Due to the retrospective application of Section 16(5), the credit cannot be treated as wrongly availed, and once that basis disappears interest cannot survive - A penalty cannot survive when its sole statutory and factual foundation has disappeared. This does not mean that every independent penalty falls when a tax demand is set aside, since a penalty for fraud, false invoicing or suppression must be considered under the applicable provision, but no such penalty was in issue - The interest and the penalty under Section 73(9) are set aside, and the appeal is allowed - The assessee appeal is allowed.
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