ITC can be claimed even in Mismatch of 2A & 2B provided Purchasing Dealer has taken all steps diligently

In M/s Honeywell Automation India Ltd. v. Commissioner of Trade & Taxes, Delhi (Appeal No: 08-11/ATVAT/2019 dated August 13, 2021] M/s Honeywell Automation India Ltd. ("the Appellant") has filed the current appeal against Order dated March 23, 2019 wherein Special Objection Hearing Authority ("SOHA") disposed of the objections filed by the Appellant against notice for default assessment of tax and interest under Section 32(1)(c) and Section 32(1)(d) of the Delhi Value Added Tax Act, 2004 ("DVAT Act") for claiming of excess Input Tax Credit ("ITC") than the corresponding output tax reported by the selling dealer.

The Appellate relied on the judgment of Suvasini Charitable Trust v. Government of NCT of Delhi & Another, [W.P. (C) 4086/2013 dated October 26, 2017] wherein it was held that the Revenue is precluded from invoking section 9(2) (g) of the DVAT Act to deny ITC to a purchasing dealer who has bona fidely entered into a purchase transaction with a registered selling dealer who had issued a tax invoice reflecting the Taxpayer Identification Number ("TIN"). The case also provided that as long as the purchasing dealer has taken all steps, he cannot be expected to keep track of the deposits made by the selling dealer with the Government towards his outward liability.

The Hon’ble Delhi Value Added Tax, Appellate Tribunal ("DVAT AT") noted that the Assessing Officer ("AO") did not levy tax and penalty due to appellant not being diligent or that he was not a bonafide purchasing dealer but the same has been levied due to mismatch in FORM 2A and 2B.

Noted, that applying the ratio of Suvasini Charitable Trust Case, to the circumstances in the present case, Appellant is therefore entitled to claim ITC. The AO has erred in imposing a penalty on the ground of mismatch.

Our Comments

Although the current issue pertains to Pre- GST regime, however the same issue has been observed in mismatch of Form GSTR 2A/ 2B and GSTR-3B.

In this regard, the safeguards to the stated issue has been discussed and provided in the recent judgment of M/s D.Y Beathel Enterprises v. The State Tax Officer (Data Cell) [W.P.(MD)Nos. 2127, 2117, 2121, 2152, 2159, 2160, 2168, 2177, 2500, 2530, 2532, 2534, 2538, 2539, 2540, 2503 & 2504 of 2021 dated February, 2021] wherein the Hon’ble Madras High Court quashed order levying entire tax liability on the purchasing dealer by holding that omission on the part of seller to remit tax should also be viewed seriously and strict action should be taken against the seller.

Recently, in the Union Budget of 2021-22, the Finance Ministry has also proposed amendment in Section 16(2) of the CGST Act by inserting clause (aa) that provides an additional requirement to claim ITC based on GSTR-2A and newly introduced GSTR-2B, i.e., ITC on invoice or debit note can be availed only when details of such invoice/debit note have been furnished by the supplier in the statement of outward supplies (GSTR-1) and such details have been communicated to the recipient of such invoice or debit note.

"(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37."

However, the provision has only been proposed and not effective yet. Therefore, the department till the time amendment is notified cannot deny the ITC claim purely on the basis of mismatch in Form GSTR-2A and GSTR-3B respectively.