Suncraft Energy Private Limited and Another v. The Assistant Commissioner, State Tax [MAT 1218 of 2023 dated August 02, 2023]

In the recent case of Suncraft Energy Private Limited and Others v. Assistant Commissioner, State Tax, the Calcutta High Court issued a landmark decision. Without properly investigating the supplier, the court addressed the matter of denial of Input Tax Credit (ITC) to the recipient. The decision emphasizes the importance of carefully assessing the supplier’s behavior before overturning ITC claims.

M/s. Suncraft Energy Private Limited (“the Petitioner”) sells goods to the customers and charges GST from them and at the time of filing Form GSTR-3B avails ITC on inward supplies. However, some suppliers did not disclose the supplies in their Form GSTR-1 of the financial year 2017-18. Accordingly, such transactions never auto-populated in Form GSTR-2A of the Petitioner.

An intimation was sent to the petitioner by the Revenue Department (“the Respondent”) due to an ITC mismatch between Form GSTR-2A and Form GSTR-3B.

On December 6, 2022, the Petitioner received a Show Cause Notice (“the SCN”) requesting that they withdraw the excess ITC they had claimed for the financial year 2017–18 on account of an ITC discrepancy between Form GSTR-3B and Form GSTR-2A.

The Petitioner denied the claims made in the SCN in its reply, which was submitted on January 6, 2023, and January 11, 2023, respectively. Among other things, the Petitioner stated that it had already paid the supplier the applicable taxes for the transaction before claiming the ITC on the aforementioned inward supplies.

The petitioner argued that the department erred in reversing the credit granted and had ordered the petitioner to deposit the tax that had already been paid to the supplier at the time of purchasing goods and services, despite the petitioner having satisfied all of the requirements listed in Section 16(2) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).

On February 20, 2023, the Adjudicating Authority issued an order (“the Impugned Order”) requiring the payment of tax in the amount of INR 6,50,511 as well as any relevant interest and penalties. The aggrieved petitioner appealed the impugned ruling to the Calcutta High Court.

The Hon’ble Calcutta High Court held that, the issuance of a demand notice on the recipient of service on account of a mismatch in Form GSTR-2A and Form GSTR-3B, ITC cannot be sustained without any investigation being done at the end of the supplier whose invoices are not reflecting in Form GSTR-2A.

The HC opined that, only in exceptional cases, such as collusion between the recipient and the supplier or the supplier’s absence or closure of business, proceedings can be initiated against the recipient. It relied upon the Judgement of the Hon’ble Supreme Court in Union of India v. Bharti Airtel Ltd. And Ors. (2022) 4 SCC 328 wherein the court held that, Form GSTR-2A is only a facilitator for taking a confirm decision while doing such self-assessment. Non-performance or non-operability of Form GSTR-2A or for that matter, other forms will be of no avail because the dispensation stipulated at the relevant time obliged the registered persons to submit return on the basis of such self-assessment in Form GSTR-3B manually on electronic platform.

Therefore held that, the demand notice issued to the Petitioner for reversing the ITC availed could not be sustained without proper inquiry into the supplier’s actions.

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