Kerala High Court Ruling: Denial of Input Tax Credit Overturned

Introduction

The Kerala High Court recently made a significant ruling in the case of GMA Pinnacle Automotives Pvt. Ltd. vs State Tax Officer, Kerala, regarding the denial of Input Tax Credit (ITC) due to a mismatch between GSTR-2A and GSTR-3B. This article delves into the details of the case, the issues raised, and the court’s judgment, shedding light on its implications.

Facts of the Case

GMA Pinnacle Automotives Pvt. Ltd., the petitioner, underwent an assessment for the period from July 2017 to March 2018. However, their claim for Input Tax Credit (ITC) was denied by the tax authorities. Despite the petitioner’s efforts to rectify the situation and align with GST guidelines, including expressing willingness to produce necessary documents, their claim remained rejected.

Issue

The core issue at hand was whether the denial of ITC based on discrepancies between GSTR-2A and GSTR-3B was justified without affording the petitioner proper communication and clarification opportunities, as mandated by a circular dated 27.12.2022.

Held

In a landmark decision, the Kerala High Court ruled in favor of the petitioner, setting aside the order that denied Input Tax Credit. The court emphasized that the denial of ITC without affording the petitioner an opportunity to present their case violated principles of natural justice. The court directed that any application for rectification of the order regarding the ITC claim, supported by necessary documents, should be treated as a new application and considered afresh by the respondent following legal norms.

This judgment underscores the importance of procedural compliance by tax authorities and upholding taxpayers’ rights to rectification and clarification. It serves as a reminder that fair treatment and due process must be observed in tax assessments to ensure justice and transparency in the system.