Draft Reply of GST Notice DRC-01 for ITC mismatch in GSTR-2B and GSTR-3B

When the concerned tax officer issues a notice in FORM GST DRC- 01 to the taxpayer for non-payment of tax or short payment of tax or input tax credit utilised incorrectly or availed incorrectly or a refund is issued erroneously and the taxpayer does not pay the same, he is referred to as a defaulter, and the concerned tax officer can issue FORM GST DRC-09 for recovery of the amount due to the defaulter from the department as per clause (a) of sub-section (1) of section 79 the CGST Act.

Here is a Draft Reply of DRC-01

That the taxpayer wants to submit as under:-

1. That, the DRC-01 issued was not containing any digital signature of the proper officer. Therefore, the above notice is not sustainable in the eyes of Law and such SCN to be considered invalid.

That, in the matter of Marg ERP Ltd vs CGST arising out of W.P.C. 872/2023, the Hon’ble Delhi High Court has held that “an unsigned notice/order cannot be considered as an order and hence cannot be sustained.”

That the DIN (Document Identification Number) entered by your good self is incorrect and was not verified and authenticated at GST Portal. Therefore, in the absence of correct DIN, the above Show Cause Notice(SCN) is null and void.

That in the above-mentioned notice, the date of the Personal Hearing is too early and how it can be done before the submission of reply of the taxpayer which shows that the absence of application of mind by the proper officer while issuing the SCN to the taxpayer.

That various discrepancies were noticed by your good-self are:-

Unpaid Tax Liability for Mismatch Between GSTR-1 and 3B

That being the first year of implementation of the new GST Law, the taxpayer and his staff was not well educated and well versed with the new system of GST. Therefore, certain additional entries were fed in the system wrongly due to clerical mistakes and hence, a mismatch arises. Therefore, you are requested to please do not consider the following entries in GSTR-1 :-

Date, Bill No., GSTIN, Invoice Value

Excess ITC Claimed in Form 3B as compared to GSTR 2A

That no excess ITC was availed by the taxpayer in his returns. The taxpayer had claimed ITC only for which he is in possession of goods, invoice, proof of bank payments and actual movement of goods was made and all transactions are absolutely genuine excluding ineligible ITC. However, all the sellers exist at their business premises and can confirm the transaction also. Therefore, you are requested to please consider the following transactions and allow the ITC to the taxpayer as all the conditions of Section 16 of the CGST/DGST Act, 2017 were duly complied. The same view was also held by the Hon’ble Supreme Court in the matter of Ecom Gill Coffee Trading Pvt Ltd.

That, in the matter of Diya Agencies vs State Tax Officer arising out of W.P.(C). 29769 of 2023, the Hon’ble Kerela High Court held that “ITC cannot be denied to the recipient solely on the ground that transactions are not reflected in GSTR-2A.” However, GSTR-2A is merely a facilitator and cannot be presumed to be accurate and complete.

The list of such transactions due to which the mismatch arising is as follows and all the necessary documents are enclosed for your ready reference:-

Date, Bill No. GSTIN, Invoice Value, E-way Bill No.

ITC Claimed from Non-Existent Dealers

That the purchases from the following dealers were made which exist at the time of transaction and actual movement of goods was taken place. Tax payer is in possession of a valid invoice, e-way bill and proof of payment of taxes along with payment of goods from bank to the supplier. All the returns of the supplier were also filed as per your GST Portal and are in the records of the GST Portal. Therefore, compliance of Section 16 of the CGST/ DGST Act, 2017 was completely done by the taxpayer.

Further, it is the duty of the supplier to pay the taxes collected as per the mechanism drawn by the Central Government of India otherwise it will be tantamount to double taxation.

However, it is not possible to verify from the taxpayer that whether the supplier had paid the tax or not or whether the supplier would have adjusted from his ITC because it is the duty of the administrator (i.e.Government) and not the bonafide purchaser and as per GST portal, the taxpayer can verify only that the supplier had filed his GSTR-3B or not, which was duly filed in this case. It is also pertinent to note that your good self has not brought any material contrary to Law and therefore, no adverse inference may be called for.

Date, Bill No., GSTIN, Invoice Value, E-way Bill

Copy of the above-said invoices, e-way bill along with the payment of proof is enclosed for your ready reference.

That in the matter of Gargo Traders vs Joint Commissioner of Commercial Taxes arising out of W.P.C. 1009 of 2022, the Hon’ble Calcutta High Court held that “a recipient of goods/services cannot be denied ITC if supplier becomes non-existent or their registration was cancelled retrospectively.”

The same view was also upheld by the Hon’ble High Court of Calcutta in the matter of LGW Industries Ltd vs Union of India. W.P.C 23512 of 2019.

That the Bombay High Court in CIT Vs. T. Maneklal Mfg. Co. Ltd. (1978) 115 ITR 725 has observed that the Income-tax Act being an all-India statute, uniformity in the construction of its statutory provisions is eminently desirable and the considered opinion of any other High Court should be followed unless there are overriding reasons for taking a divergent view. Therefore, GST is also an All India Statute and Principle of uniformity should be followed.

Therefore, looking into the facts and circumstances of the case, the taxpayer is ready to fully co-operate with you and request you to quash the notice and delete the proposed demand in full.

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Drafted by CA Naman Gupta. He can be contacted at 9891468846; or [email protected].