2026-VIL-308-GSTAT-GZB
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SGST Tribunal

GST - Transition of TDS credit through Form GST TRAN-1 - Demand on grounds beyond the SCN - Section 73 and Section 75(7) of CGST Act, 2017 - Respondent, a works contractor, claimed in Form GST TRAN-1 transitional credit consisting of a small purchase-credit component and a large component of tax deducted at source from its works-contract receipts under the UPVAT Act. SCN under Section 73 alleged a mismatch between the TRAN-1 claim and the credit shown in the VAT return, and non-furnishing of particulars of Forms C - Whether a ruling on the eligibility of VAT TDS for transition can be given in the absence of a properly framed allegation and component-wise determination - HELD - The SCN is the foundation of the Revenue's case. The SCN identified only the return mismatch and the Form C objection. It did not separately identify an amount as TDS or allege that such an amount was incapable of transition because it arose from deductions from outward receipts. The Form C ground was dropped in the adjudication order. The rejection on the ground that TDS is not input tax was a distinct charge introduced for the first time in the order. Mere reference to Section 140 and Rule 117 does not meet the requirement of natural justice in the absence of a specific allegation - Section 75(7) confines confirmation of demand to the grounds specified in the notice, and the adjudicating order cannot repair a missing substantive charge. The order also did not reconcile the TDS component with the purchase-credit component, which is contrary to Section 75(6) requiring the order to state the relevant facts and its basis. The Revenue produced no completed VAT assessment or refund-disposal order to show that the legacy balance was rejected or exhausted, and such an order cannot be presumed. Remand merely to construct a fresh charge beyond the SCN would not cure the defects. As the appeal is decided on the validity of the notice and the proof of the demand, the question whether TDS can in principle be included in TRAN-1 is left open - The demand cannot be restored and the Revenue appeal is dismissed - Interest and penalty - Section 50 and Section 73(9) of CGST Act, 2017 - Interest and penalty were confirmed along with the tax demand on the transitional credit. The Respondent contended that the credit had been used before the notice and that there was no fraud, wilful misstatement or suppression - Whether the interest and penalty confirmed can be sustained - HELD - Interest must have a statutory basis and a verifiable computation. Interest on credit wrongly availed and utilised under Section 50(3) is computed under Rule 88B, while interest on unpaid output tax under Section 50(1) requires identification of the liability and the period of default. These distinct bases cannot be interchanged without reasons. The material did not supply the dates, rate, ledger-based utilisation and period supporting the interest, and the statement of the Respondent that credit was used before the notice is no substitute for that working - Section 75(9) does not dispense with proof of the facts required to establish and compute interest. Absence of fraud alone does not exclude liability or penalty arising under Section 73, but the penalty rests on the tax determination, which has not been sustained. The statutory conditions for a penalty provision must first exist before it can be imposed - The determination of interest and the penalty are unsustainable and cannot be restored.
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