GSTR-1/3B Bonafide mismatch not Self Assessed Tax for recovery u/s 75(12): High Court

The dispute arose from a GST order passed for FY 2018-19, where the department raised demand on two grounds mismatch between GSTR-1 and GSTR-3B, and denial of ITC due to delayed filing of returns. The petitioner explained that the mismatch was a genuine reporting error in GSTR-1, while correct figures were consistently reflected in GSTR-3B and annual returns. It was also argued that no proper opportunity was given to clarify the discrepancy. On the ITC issue, the petitioner relied on the retrospective amendment under Section 16(5), which extended the time limit for availing credit for earlier years.

Issue Before Court: Whether a return mismatch can be treated as an admitted liability without a hearing, and whether ITC can be denied despite retrospective relaxation.

HC Decided: The Court found merit in the petitioner’s case and set aside the order. It held that a mismatch between returns cannot be straightaway treated as tax liability u/s 75(12) of CGST Act without following due process and giving the taxpayer a fair chance to explain. Bona fide errors, especially in GSTR-1, are capable of correction and should not lead to automatic demand.

On ITC, the Court clearly held that the retrospective amendment protects the petitioner’s claim. Since the return was filed within the extended timeline, the denial of ITC was not justified. The matter was sent back to the authorities to reconsider the mismatch issue after granting proper opportunity, while confirming that the ITC claim cannot be denied in law.

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