2026-VIL-180-GSTAT-BLR
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SGST Tribunal

GST - Demand based on mismatch between GSTR-3B and GSTR-2A - Demand of input tax credit on the ground that credit in GSTR-3B exceeded credit in GSTR-2A for 2017-18 - Appellant issued credit notes for goods returned by customers and added the tax on them to ITC in GSTR-3B instead of reducing its output tax, and the annual return showed the credit notes in the relevant table - Proper officer treated the entire difference between GSTR-3B and GSTR-2A as wrongly availed credit and confirmed the demand - Whether the demand can be sustained on the ground stated in the show cause notice - HELD - The difference was the tax on the credit notes declared in the annual return and not credit on purchases, since the credit on purchases from registered suppliers was within the credit shown in GSTR-2A - The Appellant had paid output tax on the full value of its sales and took the deduction only once. Clause (aa) of Section 16(2) came into force only on 01.01.2022, and the Circular recognises that for 2017-18 a difference between GSTR-3B and GSTR-2A calls for verification of facts and is not proof of excess credit - GSTR-2A shows only inward supplies reported by suppliers, and the tax on a credit note issued by the Appellant to its own customer can never appear in it. The proper officer compared totals across the taxes together and split the difference equally between central tax and State tax without tracing it to any head, did not examine the annual return and ignored the explanation, despite Sections 73(9) and 75(6) requiring consideration of the representation and the basis of decision - The records on the common portal, such as the annual return, the statements of outward supplies and the monthly returns, could have been verified, and specific records could have been called for - The FAA went beyond the record by holding that suppliers had not filed returns, which the notice never alleged, did not deal with the main ground, and failed to record reasons as required by Section 107(12). The Appellant also shares the blame for not filing its reply in the prescribed form on the portal and for not appearing before the appellate authority, but the appeal was decided on merits - The demand cannot be sustained on a difference that the Revenue never examined. No interest under Section 50(3) or penalty under Section 73(9) where no tax is due; amount paid under protest to release frozen bank account is refundable - The Order-in-Appeal is set aside and the appeal is allowed - Reporting tax on credit notes as input tax credit - Effect of reporting tax on credit notes issued for goods returned as input tax credit instead of reduction of output tax - Appellant showed the tax on credit notes issued to its own customers as input tax credit in GSTR-3B, while the credit notes were declared in the annual return for the same year - Whether the amount becomes payable because it was reported in the wrong table of the return - HELD - A credit note issued by the Appellant records a reduction in the value of its own outward supply and is not a supply made to the Appellant. The tax on it is not input tax under Sections 2(62) and 16(1), and the Appellant erred in reporting it as such in the self-assessed return - However, Section 34 allows a supplier who issues a credit note for goods returned to reduce its tax liability if it declares the credit note in its return within the time fixed, and the credit notes were declared in the year in which they were issued. The Appellant did not also use the credit notes to reduce its output tax, and the tax paid to the Government would have been the same had the output tax been reduced in the correct table - A substantive condition must be met, but failure to observe a procedural condition does not defeat the benefit where the substance is satisfied. The mistake of table is a matter of form, and the amount placed in its correct table is a reduction of output tax under Section 34 and not credit wrongly availed. Section 155 governs a claim to input tax credit and does not apply, and a self-assessed return stands unless questioned in the manner provided by the Act. The genuineness of the credit notes was never questioned by any authority - The error in reporting does not make the amount payable - Conditions of Section 34 urged at the appellate stage - Reliance by the Revenue at the appellate stage on conditions of Section 34 of the CGST Act, 2017 not raised in the show cause notice - The Revenue contended that the Appellant had not shown that the goods came back, that the incidence of tax was not passed on or that its customers reversed their credit - Whether the demand can be sustained on these grounds - HELD - None of these grounds is in the notice. Under Section 75(7), no demand shall be confirmed on grounds other than those specified in the notice, and the Department cannot travel beyond the show cause notice - The Appellant cannot be faulted for not proving what it was never asked to prove. The plea also fails on its own terms, as the proviso to Section 34(2) as it stood for 2017-18 barred the reduction only where the incidence of tax had been passed on to another person, and the credit notes show the value and tax credited to the purchasers. The reversal of credit by the customer was not a condition for the supplier's reduction for 2017-18 - The plea of the Revenue is rejected - Limitation for filing appeal before the Appellate Tribunal under Section 112(1) of the CGST Act, 2017 - The order of the first appellate authority was communicated on the date it was passed, and the appeal was filed before the Tribunal with the pre-deposit under Section 112(8) after the normal period of three months - Whether the appeal is within time - HELD - Section 112(1) provides for appeal within three months from the date of communication of the order or the date notified by the Government on the recommendations of the Council, whichever is later. By notification, the Government notified a later date for filing appeals against orders communicated before 01.04.2026. The Appellant filed the appeal before that date along with the pre-deposit - The appeal is within time.
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