GST UPDATE

Appeal No.: APL/4/BUR/2026

Tribunal: GSTAT (Bengaluru)

Case Title: Sandvik Coromant India Private Limited v. Deputy Commissioner

Outcome:Appeal was decided in favour of the taxpayer

Judgement Date: 14.10.2026

QUESTION BEFORE HON’BLE TRIBUNAL:

Whether the appellant availed excess ITC in FORM GSTR-3B for the period 2019-20 as against the ITC auto populated in FORM GSTR-2A for the period?
Whether there was non-accounting of 46 E-way bills by the appellant? If yes, whether tax demanded under Section 35(6) of the CGST Act on a value arrived at by adding a gross profit of 10% is valid?
Whether levy of interest is leviable on the ITC reversed on the purchase return, where there was sufficient balance available under other heads?
Whether the tax is leviable on the credit notes issued towards sales return but not reported in GSTR-1 for the relevant period?

Whether the interest levied and the penalty imposed are sustainable?

BRIEF FACTS OF THE CASE:

Departmental audit was conducted in the case of Sandvik Coromant India Pvt Ltd. (hereinafter referred to as Appellant) for the period 2019-20. Audit findings were communicated to the appellant pursuant to completion of audit, against which appellant gave reply. Thereafter, GST authority issued additional audit observations. Appellant gave reply against the additional audit findings also. Subsequently, audit report was issued under Section 65(6) of the CGST Act 2017. Appellant gave detailed reply against the same and discharged tax pertaining to Audit observation no. 3, however, submissions made were not accepted by the adjudicating authority. Subsequently, a show cause notice was issued and demand of tax, interest and penalty was raised. Reply against the said notice was submitted by the appellant. Adjudicating authority accepted some of the submissions of the appellant and dropped demand partly. Aggrieved appellant preferred an appeal before the appellate authority against the confirmed part of the demand of tax. The appellate authority upheld the order-in-original passed by the adjudicating authority. Thereafter, appellant preferred appeal before the Appellate Tribunal.

For the sake of better understanding and clarity for our readers, each issue is taken up separately:

Issue-1: Regarding the difference between the GSTR-2A and GSTR-3B:

Contentions of the Appellant:
Appellant re-produced reconciliation statement which was produced at the earlier stages also substantiating the figure of actual excess ITC availed and the amount alleged by the show cause notice was much higher. The Appellant explained that the invoice attributed to one of the Suppliers- Golden Palms Hotel & Spa- was actually a summary or consolidated reference covering multiple underlying invoices. Those invoices had been reported by the supplier in a subsequent GSTR-1, and the corresponding details were available in the GSTR-2A statement downloaded for the later period. In respect of the credit related to Sandvik Asia Private Limited, the Appellant also produced Bills of Entry to establish its entitlement to IGST credit on imported goods.
Further, that the during the period in dispute there was no requirement to match the ITC available as per GSTR-2A and GSTR-3B.The said provision came into effect from 1 January 2022.
Contentions of the Revenue Department:
That the ITC pertaining to invoices which were not reflected in GSTR-2A cannot be availed by the appellant, and thus such ITC deserves to be reversed .
Judgement of the Tribunal:
The Tribunal examined the invoices, GSTR-2A extracts, reconciliation statements and other supporting documents instead of treating the mismatch as conclusive evidence of excess ITC. It observed that the first appellate order had not properly examined the documents produced by the Appellant.
With respect to invoices pertaining to one of the supplier - Golden Palms Hotel & Spa- which was alleged to be not reflected in GSTR-2A, tribunal observed that the copy of invoices along with email correspondence as which were evidence of clubbing of invoices and issuance of summary invoice, were produced by the appellant. Further, copy of GSTR-2A was referred as produced by the Appellant. Tribunal observed that invoice which was shown by the appellant in his books was the summary invoice which pertained to 57 invoices. On the basis of analysis of all the above mentioned documents along with GSTR-2A and it was observed that all the invoices which were part of the Tax summary note for the individual invoices issued during the January 2019 in GSTR-1 of April 2019. Further, there was no issue raised by the departmental officers regarding the eligibility of the ITC availed on other than invoices which did not got reflected in GSTR-2A. Therefore, ITC under CGST and SGST attributable to the above services and invoices received from the said supplier was available to the appellant.
With regards to the invoices pertaining to another supplier:- Sandvik Asia Private Limited
It was observed that the activity being import of goods for which copy of bills of entry was submitted for verification. It was observed that for claiming ITC on the IGST paid on import, there was no utility available for the relevant period to auto populate in GSTR-2A. Thus, department’s only contention was non availability of entries in GSTR-2A which is established as per the documents submitted. Hence, the ITC stands to be allowed to appellant.
Furthermore, with regards to the remaining 4 invoices pertaining to the remaining suppliers, it was observed that the Appellant had not furnished the necessary proof that the suppliers had actually paid the tax to the Government. Therefore, in accordance with Sections 16(2)(c) and 155 , the credit was disallowed.
The Tribunal rejected the contention of the department that Appellant should match the auto populated data in Form GSTR2A before availing the ITC in GSTR -3B before the introduction of Section 16(2)(aa) of the Act which inserted by FA 2021, w.e.f 01.01.2022. Reliance was placed upon the decision in the case of Union of India v. Bharti Airtel(2021-TIOL-251-SC-GST] in which it was held that the registered person must assess its credit from its own records and the GSTR-2A was merely a facilitator.
Along with that, the Section 16(2)(c) as upheld by the decision of the Supreme Court in the case of Bhandari Scrap Traders v. Union of India [2026-TIOL-32-SC-GST] . Further, reliance was placed upon the Supreme Court in the case of State of Karnataka v. Ecom Gill Coffee Trading (P) ltd. [2023-TIOL-18-SC-VAT] wherein it was held that Section 155 places the burden of proving eligibility to credit on the person who claims it. Since the appellant failed to produce substantive certificates or proof for the remaining four suppliers, ITC pertaining to same was disallowed and the demand raised against the same by the adjudicating authority in its order was upheld.
With regards to the second issue-E-way bills for non-accounted purchases:
Appellant contended that:
That the 46 E-way bills relied upon pertained to transportation of imported goods from customs warehouse to the premises of the appellant. Further, that proper books of accounts were maintained bythe appellant and that the ITC claimed was well within the purview of Section 16(2)(c). It therefore contended that Section 35(6) could not be invoked because the provision applies where goods or services have not been accounted for.
To rebut the allegations, appellant again produced the purchase register and other documents which were previously produced before Adjudicating authority and appellate authority for consideration and contended that an addition to the turnover of the appellant was arbitrary. For this reliance was placed upon Madras High Court judgement in the case of Jayalakshmi Oil Mills v. State of Tamil Nadu [2012 (2) TMI 450].
Department contended that:
Appellant has failed to account for 46 e-way bulls in its purchase register even though the reconciliation statement with supporting documents like purchase register etc.
That the demand under Section 35(6) read with Rule 56 was rightly raised pertaining to the unaccounted inward supply and the appellant failed to reconcile the 46 e-way bills within its books.

Tribunal held that:
Tribunal held that based on the observation of the relevant extracts of the show cause notice, order-in-original and order-in-appeal, there was no consideration of the reconciliation submitted by the adjudicating authority or appellate authority. Tribunal stated that the reconciliation statement contained the HSN/From place/ Assess Value and other necessary details. Furthermore, the screenshot of the accounting entries in the ledger were also made available repeatedly at the earlier stages also. It was held that, had the authorities carefully examined the “accounting document no.”, this matter would have dropped at the earlier stages already. Furthermore, Section 73(9) requires a proper officer to determine the tax “after considering the representation” and section 75(6) “set out the relevant facts and the basis of his decision”.
Along with that, Tribunal distinguished the reliance placed upon the decision in the case of M/s Nathu Ram Ramesh Kumar v. Commissioner of Delhi [2014-TIOL-35-SC-CT] that the unaccounted E-way bills to be deemed as E-way bills on the ground that since the judgement was under the Delhi VAT which provided for computing the deemed sale where books of accounts are not maintained to the satisfaction of the officer and sales which were under booked, then, 10% addition was made to determine the deemed value of sale. However, there is no ‘deemed sale’ concept as discussed in the impugned judgement under the GST Act and the provisions contained in Section 35(6) cannot be equated with deemed sale provision provided under VAT law. Therefore, the decision relied upon is distinguishable.
Along with that, Tribunal relied upon the decision in the case of Kranti Associates (P) ltd. V. Masood Ahmed Khan [(2010) 9 SCC 496] wherein it was held that a quasi-judicial authority is mandatorily required to record the reasons which depict real application of mind on the facts of the case which are present before him. However, such principle has not been satisfied in the instant case.
Further, tribunal analysed the following documents :

reconciliation statement “Statement of E-way bills linked to Purchase Register maintained for the period 2019-20 and 2020-21 based on which the appellant linked the 46 E-way bills to the document entry in the purchase register.
Reconciliation statement “purchase register for the year 2019-20 and 2020-21 linked the invoice no.
Screenshot- Display document- data entry view .

Thus, all the above mentioned documents clearly depicted that each e-way bill traced to an invoice and an accounting entry.
On examining the documents itself, the Tribunal found that the goods covered by each of the 46 e-way bills were recorded in the Appellant's books and could be traced to the relevant invoices and accounting entries. Section 35(6) applies where goods or services have not been accounted for. Since the Tribunal found that the goods had been accounted for, the basic condition for invoking the provision was absent.Further, the question of adding 10% gross profit did not arise once the underlying demand itself failed.
With regards to the third issue: Interest on tax wrongly availed
Appellant contended that:
The demand of interest was not sustainable for the period 21.03.21 to 14.03.24 on the ground that even though remittance of tax was made on 14.03.2024, however, there was sufficient balance in the Electronic Credit ledger till the date of remittance by the appellant. Hence, no such liability is liable to be paid.
Department contended that:
That the appellant via DRC-03 reversed the excess availed ITC in GSTR-3B v ITC available as per GSTR-2A, however, interest was not paid by the appellant for the period from the date of availment till the date of reversal.
Tribunal held that:
Appellate tribunal examined the statement of Electronic credit ledger for the respective period. Further, it was observed that interest was confirmed only under SGST head and not under CGST head by the adjudicating authority in its order, the reason for which not mentioned therein.
The Tribunal examined Section 50 of the CGST Act, distinguishing between interest on delayed payment of tax under Section 50(1) and interest on ITC wrongly availed and utilised under Section 50(3). It noted that the proviso to Section 50(1), which limits interest on delayed filing of returns to the portion paid through the electronic cash ledger, did not govern the present situation because the dispute concerned non-reversal of ITC rather than delayed filing of a return. Therefore, the instant case is covered under Section 50(3).
Furthermore, sub rule (3) of Rule 88B was referred and it was observed that Section 50(3) deals with “input tax credit wrongly availed and utilised” whereas Rule 88B sub rule (3) deals with “utilisation of input tax credit wrongly availed”. Therefore, the subsection (3) of the Section 50 input tax credit availed and utilised distinct from utilisation of input tax credit availed and bring levy of interest. Thus, it was held that input tax credit wrongly availed shall be construed to have been utilised, only when the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed and interest shall be computed on such amount by which the balance in the Electronic credit ledger falls below the amount of input tax credit wrongly availed. If the balance never falls below that amount, then the ITC wrongly availed will be considered as not utilised and no interest is payable.
Thus, based on above analysis and on the analysis of Electronic Credit Ledger shows the balance of ITC never gone below for the period in dispute. Therefore, it was held that no interest is liable to be paid by the Appellant in terms of subsection (3) of Section 50 of the CGST Act 2017.
Further, the appellant had paid the tax before the show-cause notice was issued and applied Sections 73(5) and 73(6) in setting aside the penalty. Therefore, the penalty which was upheld by the appellate authority was also not valid and thus set aside.
With regards to the fourth issue: Discrepancy related to credit note :
Appellant contended that:
That the demand pertaining to credit notes issued to the customers was never raised in the Audit Report drawn under Section 65(6) of the CGST Act 2017, instead the same was raised in the adjudication proceedings directly. Such approach is not acceptable and thus the demand pertaining to the same stands to be dismissed.
Department contended that:
It was observed that the appellant had at earlier stages also mentioned the fact that the credit notes under the instant matter were issued against the sales return. Tribunal observed that when a sales return is issued on account of sales return, in such case there will not be short payment of tax, instead, there will be excess payment of tax if they chose to claim it. Furthermore, it was observed that in the replies and submissions, appellant mentioned that total of IGST, CGST and SGST as computed by the tax officials.
Tribunal held that:
Tribunal on the basis of analysis it was observed that the appellant had issued credit note on their customers based on sales return and the same was not reported in GSTR-1. On the analysis of Section 37 provided for the furnishing of the details of the outward supplies and Sub-rule (2) of Rule 59 of the CGST Rules provides that credit notes issued during the month for invoices issued previously FORM GSTR-1 it is mandatory for the taxpayer to report the details of the credit notes if any issued during the period in FORM GSTR-1.
It was observed that Section 34 of the CGST Act deals with the preparation and issuance of credit note and debit note which provides for reduction in output tax liability of the supplier only if the incidence of the tax and interest on such supply had not been passed on to any other person. Hence, the value of supply originally made and tax involved therein would only get reduced and no way increase the liability in the hands of the supplier.
Tribunal held that the assumption made by the adjudicating authority was incorrect in raising demand of tax on the basis of non-reporting of the credit note issued by the appellant. Omission to report the credit notes in FORM GSTR-1 does not by itself creates a liability to tax. Therefore, the demand of tax, interest and penalty was set aside. Thus, it was held that interest is compensatory and is levied on an assessee who has withheld tax that was due and payable.
Issue-5: Demand of interest and penalty:
Tribunal held that
Section 50(3) has been substituted with retrospective effect from 01.07.2017 in analysis of which makes it clear that the interest is compensatory in nature and follows where tax remains payable.
With regards to the Penalty, tribunal observed that Section 73(9) determine the amount of tax, interest and a penalty equivalent to 10% or 10,000/-,
Section 73(9) has been upheld in the case of demand of tax upheld under issue (i) supra.

CA Pradeep Jain_

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