Lucknow Tent House v. Shashi Bhushan Singh, Additional Commissioner Grade-II, State Tax Lucknow, & Ors.

GST Update / 2026-27/0075

GST UPDATE
GSTAT: Mere Reporting of Eligible ITC Under the Wrong Tax Head Cannot, by Itself, Justify an Excess ITC Demand
Case Number- APL/36/LCK/2026
Lucknow Tent House v. Shashi Bhushan Singh, Additional Commissioner Grade-II, State Tax Lucknow, & Ors.
1. Case Details
The GST Appellate Tribunal (GSTAT) considered a dispute concerning ITC of ?2,00,816 for the period from April 2020 to March 2021. The dispute arose because the ITC reported by the taxpayer under different GST tax heads did not match the ITC reflected in the relevant returns. On comparing the GSTR-3B figures with the relevant returns, the department treated ?1,00,408 under the CGST head and another ?1,00,408 under the SGST head, totalling ?2,00,816, as excess ITC.
The proceedings were initiated under Section 73 of the CGST Act, 2017. Importantly, the case did not involve any allegation of fraud, wilful misstatement or suppression of facts. The adjudicating authority passed the order on February 3, 2025, confirming the issue, and the taxpayer's first appeal was subsequently rejected on June 26, 2025.
The matter then came before GSTAT, which examined whether the taxpayer could be considered to have wrongly claimed excess ITC merely because the credit was reflected under the CGST and SGST heads instead of the IGST head. The Tribunal specifically considered whether the taxpayer had actually claimed ITC over and above its total eligible ITC.
2. Case Law Discussion
The main dispute before GSTAT was whether a difference in the allocation of ITC between IGST, CGST and SGST could itself be treated as excess ITC. The taxpayer's case was that the total amount of eligible ITC had not been exceeded. According to the taxpayer, the problem arose because eligible IGST credit had been reflected under the CGST and SGST heads due to an inadvertent accounting or reporting allocation.
The taxpayer argued that the underlying purchases and the basic eligibility of the ITC were not disputed. In other words, the department had not questioned the genuineness of the purchases or otherwise established that the underlying credit was ineligible. The dispute was mainly regarding the tax head under which the credit was reported.
The taxpayer further submitted that the corresponding IGST credit remained under-utilised and that the apparent excess under CGST and SGST was only because of the way the credit had been reported. According to the taxpayer, this did not increase the total amount of ITC claimed. The taxpayer therefore maintained that there was no actual additional benefit or revenue loss to the Government.
The taxpayer also referred to the utilisation provisions under Section 49 of the CGST Act and submitted that IGST credit can be utilised towards CGST and SGST liabilities in accordance with the prescribed mechanism. On this basis, the taxpayer argued that the difference between the individual tax heads should not be viewed in isolation when the taxpayer's overall eligible ITC remained within the permissible limit.
Another important submission of the taxpayer was that sufficient credit was available in the Electronic Credit Ledger. The taxpayer maintained that the dispute was essentially a matter of reconciliation and correction of the tax-head classification rather than a case where fresh or additional ITC had actually been claimed. Accordingly, the taxpayer argued that the tax demand, interest and penalty should not be sustained.
The department took a different position. It argued that ITC has to be claimed under the appropriate tax head and that credit reported under an incorrect head cannot simply be treated as valid credit under another head. According to the department, where there was a shortfall under one tax head, the taxpayer was required to discharge the liability under that particular head. Any excess payment or credit under another tax head would have to be dealt with through the appropriate legal mechanism, including refund wherever applicable.
The first appellate authority also considered the issue from the perspective of Section 16(2)(c) of the CGST Act. It took the view that ITC is available only under the tax head in which the corresponding tax had actually been deposited. It also observed that movement or utilisation of credit between different tax heads has to take place through the prescribed cross-utilisation mechanism.
GSTAT therefore had to determine whether the amounts of ?1,00,408 each under CGST and SGST could genuinely be treated as excess ITC when corresponding eligible credit was stated to be available under IGST and the taxpayer had not exceeded its total eligible ITC.
While examining this issue, GSTAT considered the Kerala High Court decision in Rejimon Padickapparambil Alex v. Union of India. The Tribunal noted that the case involved a similar situation in which IGST credit had inadvertently been reported by splitting it into CGST and SGST in GSTR-3B, resulting in a mismatch with GSTR-2A. This decision was relevant to the Tribunal's consideration of whether a reporting difference between tax heads should automatically result in an excess ITC demand.
GSTAT also considered the principle contained in CBIC Circular No. 192/04/2023-GST regarding the calculation of interest in cases involving wrongly availed IGST credit. The Tribunal's discussion focused on the importance of considering the combined balance of IGST, CGST and SGST credit available in the Electronic Credit Ledger for the relevant purpose, rather than looking at the balance of only one individual tax head in isolation.
The Tribunal explained this principle by comparing the Electronic Credit Ledger to a wallet having separate compartments for IGST, CGST and SGST. For the purpose considered in the circular, the overall balance in the wallet is relevant rather than looking only at one individual compartment. Therefore, where the combined balance of IGST, CGST and SGST does not fall below the amount in question during the relevant period, the fact that the balance under one individual tax head may be lower does not, by itself, establish actual utilisation of the disputed credit.
The taxpayer relied on this principle and maintained that its overall ITC balance was sufficient and that there was no substantive excess availment. The Tribunal, however, also recognised that the factual position needed to be verified from the actual Electronic Credit Ledger and the relevant returns.

3. Court Decision
GSTAT ultimately found that the department had not established that the taxpayer had actually claimed ITC in excess of its total eligible entitlement. The Tribunal observed that the department's case was essentially based on the difference in the reporting of credit under different tax heads. According to the Tribunal, such a difference, by itself, was not sufficient to establish that the taxpayer had actually taken excess ITC.
A significant factor considered by the Tribunal was that the department had not established any actual revenue loss arising from the alleged misclassification. The taxpayer's explanation was that the corresponding eligible IGST credit existed but had been reflected under CGST and SGST. If this was factually correct and the taxpayer had not separately claimed the same credit again under IGST, the overall amount of ITC claimed would not have increased.
However, GSTAT did not simply accept the taxpayer's statement without verification. The Tribunal specifically noted that neither the original adjudicating authority nor the first appellate authority had properly examined whether sufficient eligible ITC was actually available under the IGST head.
The Tribunal therefore considered this to be an important factual issue. The Electronic Credit Ledger and relevant returns needed to be checked to determine whether the taxpayer actually had the corresponding IGST credit available and whether the same credit had already been accounted for under CGST and SGST without being claimed again under IGST.
Accordingly, GSTAT directed the proper officer to verify whether sufficient eligible ITC was available under the IGST head. If the verification established that the corresponding IGST credit remained unclaimed and that the taxpayer had not exceeded its overall eligible ITC, the revenue demand was to be dropped.
Thus, the Tribunal did not hold that every difference between IGST, CGST and SGST reporting must automatically be ignored. Rather, it held that the department must establish that there was an actual excess claim of ITC. A demand cannot be sustained merely because eligible credit appears under an incorrect tax head, particularly where the taxpayer's overall eligible ITC has not been exceeded.
The Tribunal also considered the effect on interest and penalty. Since the principal excess ITC demand itself could not be sustained merely on the basis of the tax-head difference, the related interest and penalty could not independently survive on that basis. This was also relevant because the proceedings were under Section 73 and did not involve any allegation of fraud, wilful misstatement or suppression of facts.
The appeal was therefore allowed, subject to verification by the proper officer. The final outcome depended on the factual verification of the availability of corresponding eligible IGST credit.

CA Pradeep Jain_

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