M/S Intellimech Systems vs. The Superinendent Of Central Tax
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The petitioner challenged an adjudication order under Section 74 of the CGST Act, disallowing Input Tax Credit (ITC) due to a mismatch between GSTR-3B and GSTR-2A. The Adjudicating Officer had found the petitioner's submitted documents to be partial or incomplete.
Held
The High Court quashed the impugned adjudication order, allowing the petitioner to submit complete documents, including certificates contemplated under Circular 183/15/2022-GST, by a specified date. The proceedings were restored to the Adjudicating Authority for fresh consideration, contingent on the petitioner depositing 10% of the demand.
Key Issues
Whether the Adjudicating Authority was justified in disallowing ITC based on incomplete documents, and if the proceedings under Section 74 of the CGST Act were validly initiated without specific allegations of availing ITC without supplies.
Sections Cited
Section 74, Section 16(2)(c)
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Before: SHRI. NARAYANAN VAIDYANATHAN
The petitioner is aggrieved by the Adjudication Order dated 29.12.2025 [Annexure-A] under Section 74 of the Central Goods and Services Tax Act, 2017 [for short, ‘the 'CGST Act']. The proceedings under Section 74 of the CGST Act against the petitioner for the tax period April 2018 to February 2019 are commenced with the Adjudicating Officer initially opining that the petitioner has availed excess Input Tax Credit [ITC] in GSTR-3B than the eligible ITC as per GSTR-2A. The petitioner is issued with Intimation and Show Cause Notice, and the petitioner has also responded to such notices producing certain documents.
The Adjudicating Officer has opined that the petitioner has produced partial/incomplete documents which do not justify a conclusion as against the initial finding of excess availment of ITC. Ms. Lochana S. Babu, the learned counsel for the HC-KAR NC: 2026:KHC:33489 petitioner, submits that the Adjudicating Authority could not have initiated proceedings under Section 74 of the CGST Act because there is not even an allegation that the petitioner has claimed ITC without availing the supplies. The learned counsel contends that the observation that the petitioner has not produced complete documents is unjustified because the show cause notice did not put the petitioner on notice of the details of the mismatch.
Ms. Lochana S. Babu also proposes to contend that the petitioner must not be fastened with the liability under Section 74 of the CGST Act with the entire burden of compliance under Section 16(2)(c) of the CGST Act on the petitioner without taking action against the supplier. Mr. Shishira Amarnath, the learned counsel for the respondent, is heard and the records are perused. The proceedings under Section 74 of the CGST Act are rooted in the observations during a scrutiny. The Show Cause HC-KAR NC: 2026:KHC:33489 Notice refers to the difference in ITC claimed by the petitioner in GSTR-3B and the ITC available in GSTR- 2A.
The notice is issued observing that the petitioner has availed ITC in excess of the auto- populated GSTR-2A without ensuring admissibility and without confirming payment of tax by the suppliers. The petitioner has responded to this notice stating inter alia that:
[i] the supplies are bona fide and the recovery action against erring suppliers must be initiated in view of certain press note,
[ii] the suppliers, who have inadvertently reported tax invoices with the registration of some other tax persons, must be excluded,
[iii] it is arranging to collect the certificates as contemplated under the Circular in No. 183/15/2022- GST dated 27.12.2022 and that additional time would be required, and HC-KAR NC: 2026:KHC:33489 [iv] the petitioner has requested that these Certificates may be considered before concluding the proceedings.
This Court cannot take any exception with the Adjudicating Officer stating that the petitioner has not filed complete documents. However, this Court, because the petitioner is willing to produce documents [the Certificates as contemplated under the Circular in No. 183/15/2022- GST dated 27.12.2022] to justify the categories of exclusion and inclusion of suppliers as stated in the reply, is of the view that there must be interference with the impugned Adjudication Order to restore the proceedings with liberty to the petitioner to file all the Certificates but within certain timelines and on terms so that the mutual interests are balanced. In the light of the afore, the following. ORDER
[A] The petition is allowed-in-part. HC-KAR NC: 2026:KHC:33489 [B] The impugned Adjudication Order dated 29.12.2025 [Annexure - A] is quashed but with liberty to the petitioner to file by 14.08.2026 the different documents to justify the categories of inclusion and exclusion of suppliers as stated in the reply observing that all questions are left open to be considered by the Adjudicating Authority. [C] The petitioner shall, by 14.08.2026 deposit 10% of the demand subject to adjudication in the restored proceedings. (B M SHYAM PRASAD) JUDGE RB
Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.