2026-VIL-151-GSTAT-BLR
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  2. 2026-VIL-151-GSTAT-BLR

SGST Tribunal

GST - Non-payment of value of supply to supplier within 180 days - Second proviso to Section 16(2) of CGST Act, 2017 and Rule 37 of CGST Rules, 2017 - Appellant availed ITC on capital goods but did not pay a part of the value to the supplier, later written back as a liability no longer payable - Appellant contended that the discounted value was paid within 180 days - Whether the Appellant contravened the second proviso to Section 16(2) - HELD - Before 01.10.2023, a recipient failing to pay the supplier the value of supply along with tax within 180 days from the date of the invoice was liable to add an amount equal to the ITC availed to the output tax liability along with interest - The Appellant was required to add the proportionate ITC attributable to the unpaid value to its output tax liability immediately after the 180th day, which it failed to do. The ledger showed the balance outstanding on several later dates. The balance was written back only in the accounts of a later year, and the credit note was issued much later. No letter or agreement recording the discount within 180 days was produced - The Appellant contravened the second proviso to Section 16(2) to the extent of the value not paid - Financial or commercial credit note issued by supplier - Second and third provisos to Section 16(2) of CGST Act, 2017 - Circular 92/11/2019-GST and Circular 251/08/2025-GST - Respondent contended that the Circular of 2019 was from the supplier's perspective and that the provisos speak only of payment against invoices - Whether ITC is deniable when a value discount is given by the supplier through a commercial or financial credit note - HELD - by issuing financial/commercial Credit notes by the supplier, there is no reduction in the original transaction value of the supply, the corresponding tax liability would also not get reduced and therefore the supplier could not reverse the GST paid earlier in respect of the original invoice. Such credit note will not be reported in Form GSTR 1 of the suppliers and consequently will not appear in the return in Form GSTR 2A of the receiver. Accordingly financial/commercial Credit notes issued by the supplier will not alter the ITC availed by the receiver based on the original invoice - Circular 251/08/2025-GST clarifies that the recipient is not required to reverse ITC attributable to the discount - The object of the second proviso is met where the supplier accepts the reduced amount in full settlement and has borne the tax on the undiscounted value. On the waiver, the recipient became entitled under the third proviso to hold the credit, and Rule 37(4) makes the time limit in Section 16(4) inapplicable to such re-availment - The appellant is eligible to retain the ITC on the original invoice, and the finding of the authorities below is not sustainable - Interest on ITC attributable to unpaid value - Section 50 of CGST Act, 2017 and Rule 37(3) - Whether interest survives after the supplier waived the unpaid balance - HELD - During the period between availment of ITC and receipt of the financial credit note, the balance was payable and unpaid while the Appellant continued to hold the full credit. The second proviso, as it then stood, required the proportionate credit to be added to the output tax liability along with interest. The later waiver entitles the Appellant to retain the credit but does not wipe out the interest that accrued while the amount remained unpaid - The Appellant shall pay interest under Section 50 on the proportionate credit attributable to the value not paid, from the date of availment till the date of receipt and accounting of the credit note - Invocation of Section 74 of CGST Act, 2017 - Issue unearthed in audit - Respondent contended that Section 74 was rightly invoked as the transaction was not disclosed - Whether Section 74 was rightly invoked and what liability survives - HELD - Section 74(1) applies where credit is wrongly availed by reason of fraud, wilful misstatement or suppression of facts to evade tax. Detection in audit does not by itself prove suppression. The Appellant recorded the unpaid balance in its ledger and wrote it back openly in its audited accounts, which the audit team itself relied upon. The Appellant's view that no reversal was needed was a bona fide view later accepted by the Board in its circular - Mere omission to give correct information is not suppression unless deliberate and meant to evade duty. Under Section 75(2), where the Tribunal concludes that the Section 74(1) notice is not sustainable because fraud or suppression is not established, the proper officer determines the tax as if the notice were under Section 73(1), and the notice was within the time allowed under Section 73 - Liability to interest survives, the penalty under Section 74 is set aside, and the appeal is partly allowed - The impugned order is modified and the appeal is partly allowed.
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