M/S Arcon Project PVT LTD vs. The State Of Bihar

Held

The Court held that the assessment order and the appellate order were unsustainable. The Court found merit in the petitioner's contention that the discrepancy in input tax credit arose due to the supplier's failure to upload invoices in their GSTR-2A, a scenario addressed by the CBIC Circular dated 27.12.2022. The Court noted that Clause 3(a) of the Circular provides a specific procedure for such cases, directing that the difference in ITC claimed in GSTR-3B and available in GSTR-2A should be handled as per Para 4 of the Circular. The Court reasoned that the Assessing Officer was bound to follow this prescribed procedure. Therefore, the Court set aside both the assessment order and the appellate order to enable a fresh assessment in accordance with the Circular. The ratio decidendi is that tax authorities must follow the procedures laid down in relevant circulars issued by the CBIC, particularly when dealing with transitional issues in the initial years of GST implementation, and cannot arbitrarily disallow input tax credit without adhering to such prescribed mechanisms.

Facts

The petitioner, M/s ARCON PROJECT PVT LTD, is challenging an assessment order dated November 27, 2023, for the year 2017-18, and an appellate order dated July 10, 2024. The assessment order disallowed input tax credit amounting to Rs. 34,69,280/- because the petitioner's GSTR-3B returns did not match the GSTR-2A returns of the supplier. The petitioner contended that this discrepancy arose because the supplier had not uploaded the relevant invoices in their GSTR-2A, despite the petitioner having paid the tax. The petitioner argued that this situation was covered by a CBIC Circular issued on December 27, 2022, which provided a procedure for handling such discrepancies, especially during the initial years of GST implementation.

Key Issues

1. Whether the Assessing Officer and the appellate authority erred in disallowing the input tax credit claimed by the petitioner for the financial year 2017-18, when the discrepancy between GSTR-3B and GSTR-2A was due to the supplier's failure to upload invoices, and not due to any fault of the petitioner? (Question of law and fact, turning on the interpretation of GST provisions and relevant circulars). Petitioner's arguments: The petitioner argued that the discrepancy was solely due to the supplier's failure to reflect the tax payments in their GSTR-2A returns. They relied on Circular F No. CBIC-20001/2/2022-GST dated 27.12.2022, specifically Clause 3(a), which provides a procedure for cases where the supplier fails to file GSTR-1 but files GSTR-3B, leading to non-reflection of supplies in the recipient's GSTR-2A. The petitioner contended that the authorities should have followed the procedure outlined in Para 4 of the said Circular. Revenue's arguments: The judgment does not record any specific arguments made by the revenue or state.