Denial of Input Tax Credit Due to GSTR-3B and GSTR-2A Mismatch Upheld; Writ Remedy Not Suitable When Appellate Remedy Exists

Denial of Input Tax Credit Due to GSTR-3B and GSTR-2A Mismatch Upheld; Writ Remedy Not Suitable When Appellate Remedy Exists

Issue:

Whether a writ petition is maintainable against an order confirming a demand for differential Input Tax Credit (ITC) due to a mismatch between GSTR-3B and GSTR-2A, when an alternate remedy of appeal under Section 107 of the CGST Act is available, especially if the assessee failed to rectify the alleged error at earlier stages.

Facts:

For the period 2020-21, an order was passed confirming a demand for differential ITC, interest, and penalty, based on a mismatch between the ITC availed in the assessee’s GSTR-3B returns and the ITC available as per GSTR-2A. The assessee filed a writ petition challenging this demand. The Single Judge dismissed the writ petition, citing the availability of an appellate remedy under Section 107 of the CGST Act, and granted the assessee liberty to approach the appellate authority. In an intra-court appeal, the assessee contended that the mismatch was due to a payment made under a “different head wrongly.” However, the assessee had not attempted to rectify this alleged accounting error either before or after the show cause notice (SCN) was issued, or during the detailed scrutiny of their accounts. It was only after the SCN was issued that the assessee raised the defense of wrong payment and withdrawal, drawing support from a High Court judgment and circulars regarding rectification limitations.

Decision:

The court held that there was no reason to interfere with the impugned order of the Single Judge. The court noted that the assessee had not taken steps to rectify the alleged mismatch at earlier stages (before or after the SCN, or during scrutiny). The defense of wrong payment and withdrawal was raised only after the SCN. Crucially, the court emphasized that the assessee was not left without a remedy, as the Single Judge had already preserved their right to appeal. Therefore, the intra-court appeal was dismissed.

Key Takeaways:

• Availability of Alternate Remedy: The case strongly reinforces the principle that writ petitions are generally not entertained when an efficacious alternate statutory remedy (like an appeal under Section 107 of the CGST Act) is available. Courts prefer that assessees exhaust the appellate mechanism first.
• Timely Rectification of Errors: Assessees are expected to be diligent in maintaining their accounts and rectifying errors promptly. Raising a defense of “wrong payment” only after the issuance of a show cause notice and confirmation of demand may weaken the assessee’s position in court.
• Burden of Proof for Mismatch: The onus is on the assessee to reconcile discrepancies between GSTR-3B and GSTR-2A and provide satisfactory explanations and evidence if a mismatch leads to a demand.
• Procedural Compliance: This ruling underscores the importance of adhering to the prescribed procedures under the GST law, including responding to show cause notices comprehensively and rectifying errors in a timely manner.
• Limited Scope of Writ Jurisdiction in Tax Matters: While writ jurisdiction is a powerful tool, its application in tax matters is typically limited to cases involving fundamental rights violations, jurisdictional errors, or a complete absence of alternative remedies. Simple disputes of fact or application of law are usually left to the appellate authorities.