GSTAT Bengaluru Sets Aside 100% Penalty On I-NXT, Says ITC Mismatch Alone Can't Trigger Penalty

The Bengaluru Goods and Services Tax Appellate Tribunal (GSTAT) on 15 September held that an ITC mismatch between GSTR-3B and GSTR-2A cannot, by itself, attract Section 74 of the Central Goods and Services Tax Act without establishing a link between the mismatch and fraud, wilful misstatement or suppression of facts with intent to evade tax.

A Bench comprising Technical Member Sudha Koka and Judicial Member Srikanth Venkatraman allowed I-NXT's appeal and set aside the 100% penalty imposed under Section 74. It observed:

“In order to invoke Section 74, the authorities must establish a link between wrongful availment of ITC and the alleged fraud or wilful mis-statement or suppression of facts. Mere use of the language is not enough.”

The matter arose from verification by the anti-evasion wing of the Bengaluru West GST Commissionerate, which found a mismatch between the ITC claimed in GSTR-3B and the ITC available in GSTR-2A for the period from July 2017 to November 2021. I-NXT furnished the requested details and, on 18 January 2022, admitted the excess availment and paid Rs. 2,74,20,293 along with interest.

The Tribunal found that the adjudicating and appellate authorities had not established any link between the ITC mismatch and the alleged suppression of facts. It set aside the Commissioner (Appeals)'s order dated 29 June 2024, holding that the penalty under Section 74 was “invalid and unjustified”.

Accordingly, the GSTAT allowed the appeal.

For the Appellant: Disha Gursahaney, Advocate

For the Respondents: Prabhat Kumar, Assistant Commissioner, CGST