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14 July 2021

HC grants stay on recovery order of ITC due to mismatch in GSTR-3B and GSTR-2A.

Recently in case of “Bharat Aluminium Company Limited Limited (hereinafter referred as “Petitioner”) VS Union of India” (hereinafter referred as “Respondent”), petitioner has challenged the order, wherein ITC was denied to the petitioner on the basis of matching of input tax credit availed in GSTR-3B with details furnished by the suppliers in GSTR-2A pertaining to tax period FY 2018-19.

The Ld. Counsel appearing on behalf of petitioner has made following submissions:

  • There are no provisions under the CGST Act empowering the Department to deny ITC availed during the period FY 2018-19 on the basis of matching of Form GSTR-3B and Form GSTR-2A.
  • Section 42 of the CGST Act read with Rule 69 of the CGST Rules envisage the provision for matching of As per the said provisions, matching of Input tax credit can be done only once the return in Form GSTR-3 and Form GSTR-2 is filed by the registered person. However, the provision of filing of Form GSTR-2 and GSTR-3 has been suspended since the inception of GST.
  • Further, clause (aa) to Section 16(2) has been inserted in the CGST Act vide the Finance Act, 2021 to prescribe restriction on ITC not matching with Form GSTR-2A. However, the said amendment will be effective prospectively from a date that is yet to be notified by the
  • Section 43A of the CGST Act read with Rule 36(4) of the CGST Rules seek to restrict portion of input tax credit not appearing in Form GSTR-2A. However, the said restriction is applicable only to Input tax credit availed after 09.10.2019. Even on application of restriction under Rule 36(4), the mis-match in the instant case is less than 20% of credit appearing in Form GSTR-2A.
  • The action of the Department is in contradiction of Circular No. 59/33/2018-GST dated September 04, 2018, wherein it is clarified that refund of unutilized ITC cannot be denied where certain ITC does not match with Form GSTR-2A. The GST Press Release dated May 04, 2018 issued pursuant to the 27th GST Council meeting also states that there shall not be automatic reversal of credit from buyer on non-payment of GST by the
  • Timely filing of returns and payment of GST to the exchequer by the suppliers is not in the control of the recipient and it is impossible for the recipient to ensure that the third-party suppliers fulfil their compliance burden under
  • The proceeding for matching of ITC be initiated by the Department under the garb of general provision u/s 61 read with Rule 99 of the CGST Rules which deals with scrutiny of
  • Section 16(2)(c) of the CGST Act must be read down to not apply to recipients who enter into bonafide transactions involving actual supply of goods and/or services from genuine

Heeding the aforesaid submissions, The Hon’ble Court admitted the writ petition and granted stay on recovery order passed by Revenue Department on a condition of depositing 5% of the demand by the petitioner within 15 days and the matter has been listed for hearing in the week commencing Aug, 2, 2021.