ITC Cannot Be Denied Solely on GSTR-2A Mismatches Arising from Technical Glitches: Madras High Court

Case Overview

Case Name: Meenakshi Collections Vs Assistant Commissioner (ST)
Court: Madras High Court
Assessment Year: 2017-18
Provisions Involved: Section 16, Section 41, Section 50, Section 74 of the GST enactments; Circular No. 183/15/2022-GST dated 27.12.2022; Notification No. 79/2020 dated 15.10.2020

Background and Material Facts

The petitioner, Meenakshi Collections, approached the Madras High Court challenging a demand order dated 12.08.2024 passed by the Assistant Commissioner (ST). The impugned order confirmed a demand for alleged wrongful availment of Input Tax Credit (ITC), along with a 100% penalty under Section 74 and interest at 18% under Section 50 of the applicable GST enactments. The dispute concerned Assessment Year 2017-18.

The proceedings were initiated through an intimation issued in DRC-01A dated 25.03.2023, which was followed by a formal show cause notice in DRC-01 dated 20.06.2023 under Section 74. The respondent authority, after completing the adjudication process, passed the final impugned order on 12.08.2024, confirming the entire tax demand along with interest and penalty.

The root of the dispute lay in discrepancies between the ITC availed by the assessee and the credits reflected in Form GSTR-2A. The department alleged that the assessee had wrongfully claimed ITC on supplies that did not appear in GSTR-2A, thereby triggering the demand under Section 74.

Procedural Timeline

The sequence of events leading to the High Court challenge unfolded as follows:

  1. 25.03.2023 — Intimation issued in DRC-01A, flagging alleged ITC discrepancies for FY 2017-18
  2. 20.06.2023 — Show cause notice issued in DRC-01 under Section 74
  3. 22.07.2024 — Assessee deposited the tax amount
  4. 12.08.2024 — Respondent passed the impugned order confirming tax demand, interest, and penalty
  5. Filing of Writ Petition — Assessee challenged the impugned order before the Madras High Court

The Madras High Court was called upon to examine two primary questions:

Issue 1: Liability for Interest and Penalty

Whether the assessee could be held liable for interest under Section 50 and penalty under Section 74 in a case where ITC was availed on valid invoices, but the corresponding credits were not visible in Form GSTR-2A — particularly when such non-reflection was attributable to technical glitches in the GST portal during the early implementation phase.

Issue 2: Applicability of Circular No. 183/15/2022-GST

Whether the matter warranted fresh consideration in light of Circular No. 183/15/2022-GST dated 27.12.2022, which specifically addressed GSTR-2A discrepancies during FY 2017-18 and FY 2018-19, acknowledging systemic issues during the initial rollout of GST.

Submissions Made by the Assessee

The assessee's counsel advanced the following contentions before the Court: