GST UPDATE

Hon’ble Authority: GSTAT, Karnataka
Case Title: M/s N. R. Builders v. Commissioner of Commercial Taxes, Karnataka
Appeal No. & Citation: Appeal No. APL/2/BUR/2026

Hon’ble Judge(s)	Hon'ble Shri Prabhakaran P.M., Judicial Member & Hon'ble Shri Ravi Jesuraj S., Technical Member (State)
Date of Order	31 August 2026
Outcome	Matter Remanded

Brief Facts of the Case

M/s N. R. Builders, was issued a Show Cause Notice based on the alleged mismatch between Input Tax Credit (ITC) claimed in FORM GSTR-3B and the credit reflected in FORM GSTR-2A for FY 2018–19. The department treated the difference as excess ITC availed by the appellant. The adjudicating authority confirmed the demand ex parte because the appellant had not filed a reply to the show cause notice. The first appellate authority subsequently upheld the demand in full. Aggrieved, the appellant filed an appeal before the GST Appellate Tribunal, Bengaluru, against the order passed by the Joint Commissioner of Commercial Taxes (Appeals).

Question before Hon’ble Authority

Whether an ITC mismatch between GSTR-3B and GSTR-2A could be treated as inadmissible without examining the appellant's explanation?
Whether the order-in-original was vitiated by the failure to grant a personal hearing under Section 75(4)?
Whether the absence of a notice in FORM GST ASMT-10 under Section 61 invalidated the proceedings initiated under Section 73 ?

Brief Arguments by Appellant

The Alleged ITC Mismatch Arose from Credit Relating to the Previous Financial Year

The appellant submitted that the alleged excess ITC was not an excess claim. The difference arose because ITC pertaining to FY 2017–18 invoices had been availed in FY 2018–19 within the time permitted under Section 16(4), read with the relevant extension granted by CBIC Order No. 02/2018-Central Tax dated 31 December 2018. It was contended that the relevant credit was reflected in GSTR-2A for FY 2017–18 and not FY 2018–19. Therefore, comparing the GSTR-3B of FY 2018–19 with the GSTR-2A of the same year, without considering the previous year's credit, resulted in an incorrect mismatch.

Non-speaking Order

The appellant argued that the first appellate authority had failed to examine the reconciliation and supporting documents submitted before the Tribunal. Instead, it upheld the demand primarily on the ground that certain invoices did not appear in GSTR-2A for FY 2018–19. Reliance was placed on Assistant Commissioner (CT) v. Shukla Brothers, (2011) 22 STR 105 (SC), and Raj Kishore Jha v. State of Bihar, JT 2003 (Supp. 2) SC 354, to contend that a reasoned order is an essential requirement of a fair adjudication.

Violation of Section 75(4) Due to Absence of Personal Hearing

The appellant submitted that no personal hearing had been granted before the demand was confirmed. The show cause notice itself recorded the date, time and venue of the hearing as “NA”. It was argued that Section 75(4) makes a personal hearing mandatory wherever an adverse decision is contemplated, irrespective of whether the taxpayer specifically requests such a hearing. This amounts to violation of principles of natural justice.

Non-Issuance of FORM GST ASMT-10

The appellant contended that scrutiny of returns under Section 61, read with Rule 99 of the CGST Rules, requires issuance of a notice in FORM GST ASMT-10. Reliance was placed on Dominic David v. State Tax Officer, [2023] 146 taxmann.com 110 (Kerala), and Canon India Pvt. Ltd. v. Commissioner of Customs, Civil Appeal No. 1827 of 2018.

Brief Arguments by Respondent

The Revenue supported the adjudication and appellate orders and held that the absence of certain invoices from GSTR-2A indicated that the corresponding tax might not have been paid by the suppliers. It maintained that the appellant had not satisfactorily established compliance with Section 16(2)(c), read with Section 155, or the applicable verification requirements under CBIC Circular No. 183/15/2022-GST.The mismatch between FORM GSTR-3B and FORM GSTR-2A is sufficient prima facie material to initiate proceedings under Section 73.

Findings and Judgement

ITC mismatch cannot be decided without invoice-wise verification of the credit
The Tribunal observed that Section 16(4), as applicable to the relevant transitional period, permitted ITC relating to FY 2017–18 invoices to be claimed up to the extended due date of the return for March 2019, subject to the statutory conditions. It further observed that GSTR-2A was a facilitation tool at the relevant time and that its non-reflection of an invoice in the statement for FY 2018–19 could not, by itself, establish that the supplier had failed to pay tax. The authorities had failed to examine whether the disputed credit was reflected in the GSTR-2A of FY 2017–18 and whether it had been claimed within the applicable time limit. Consequently, the finding of excess ITC had been reached without the necessary factual verification. The tribunal held that the demand could not be sustained without invoice-wise verification of the credit.
Judicial Precedents distinguished

Case law	As distinguished by the Tribunal
Mahalakshmi Cotton Ginning Processing and Oil Industries v. State of Maharashtra, (2012) 35 STT 589	The judgment arose under the Maharashtra VAT frameworkwas rendered under the Maharashtra Value Added Tax Act, a distinct statutory scheme that did not contain provisions comparable to Section 16(2)(c) of the CGST Act read with the safeguards under Rule 36 of the CGST Rules and Circular No. 183/2022-GST, and cannot be mechanically applied to a claim governed by the GST framework
ALD Automotive Private Limited v. CTO, (2018) 70 GST 751 (SC)	The case dealt with the entitlement to claim input tax credit beyond the statutory time limit prescribed under a different State enactment, and did not concern the question of denial of credit solely on account of non-reflection of purchases in the auto-populated statement, GSTR-2A.
Microqual Techno Ltd. v. State of Karnataka, STA No. 01/2010, decided on 6 August 2010	The case proceeded on a finding that the input tax claim was not based on a genuine transaction and was made with an intent to evade tax; in the present case, there is no such finding or allegation that the underlying purchases were not genuine, the sole ground for disallowance being the mismatch between GSTR-3B and GSTR-2A.

Personal Hearing Under Section 75(4) Is Mandatory

The Tribunal noted that the show cause notice recorded the date, time and venue of personal hearing as “NA”. Section 75(4) makes the personal hearing mandatory. The absence of a personal hearing was a clear violation of natural justice and, by itself, justified setting aside the order-in-original.

Non-Issuance of ASMT-10 Does Not Automatically Invalidate Section 73 Proceedings

The Tribunal rejected the appellant's contention that non-issuance of FORM GST ASMT-10 automatically invalidated the proceedings. It observed that Sections 61 and 73 operate independently. Section 61 provides a mechanism for scrutiny of returns, for which FORM GST ASMT-10 is prescribed. However, the proceedings in the present case had been initiated under Section 73, read with Rule 142, pursuant to a specific assignment following an audit reference, and not through scrutiny under Section 61.

Accordingly, the tribunal observed that the principal tax demand required fresh determination after examining the relevant documents and hearing the appellant. The Tribunal allowed the appeal by way of remand with specific directions.

CA Pradeep Jain_

This is solely for educational purpose

Readers can also access this from our

Linkedin account : www.linkedin.com/in/ca-pradeep-jain-b6a31a16

Comments

GST update /2026-27/0099

GST UPDATE

Brief Facts of the Case

Question before Hon’ble Authority

Brief Arguments by Appellant

Brief Arguments by Respondent

Findings and Judgement

Opinion

Author’s Comment

Post a Comment

Query