BHIKAJI AIDANMALJI vs RAHUL P GAWANDE, Pune Zone

GOODS AND SERVICES TAX APPELLATE TRIBUNAL
PUNE BENCH
APL/9/PUN/2026
M/s INDERMAL AIDANMAL
OSWAL, PUNE
………….Appellant
Versus
THE COMMISSIONER OF CENTRAL
TAX, PUNE-II
………….Respondent
Quorum:
Hon’ble Shridhar Mahadeo Bhosale, Member (Judicial)
Hon’ble Dr. Nirmal Kumar Soren, Member (Technical)
Counsel for Appellant Counsel for Respondent
Shri Rahul Jain,
Chartered Accountant
Shri Lokesh Sharma,
Assistant Commissioner
FINAL ORDER
Date of Last Hearing: 05.10.2026
Date of Order: 29.10.2026
Per: Dr. Nirmal Kumar Soren, Member (Technical):
The Appeal
1. The present appeal has been filed by M/s Indermal Aidanmal
Oswal, a proprietary concern of Shri Indermal Aidanmal Oswal
trading as Bhikaji Aidanmalji (hereinafter “the Appellant”), under
Section 112(1) of the Central Goods and Services Tax Act, 2017
and the Maharashtra Goods and Services Tax Act, 2017 (together,
for short, “the CGST Act”; the provisions of the two Acts being
identical, a reference to one includes the corresponding provision of
the other), read with Section 20 of the Integrated Goods and
Services Tax Act, 2017 (“the IGST Act”). It is directed against
Order-in-Appeal No. PUN-CT-APPII-ADC-000-229-2024-25 dated
25.11.2024 (“the impugned order”) passed by the Additional
Commissioner (Appeals-II), Central Tax, Pune. By the impugned
order, the Appellant’s first appeal against Order No. PUN-II-CGST-
SUPDT-DI-R-II/11/2023-24 dated 25.01.2024 (“the OIO”) passed
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by the Superintendent, Range-II, Central GST, Division-I (Shivaji
Nagar), Pune-II Commissionerate for the period April 2018 to
March 2019 was partly allowed. The Respondent is the
Commissioner of Central Tax, Pune-II (hereinafter “the
Respondent”).
2. By the impugned order, the first appellate authority
confirmed the demand of input tax credit (“ITC”) of Rs. 31,115/-
(IGST) with interest under Section 50, and the demand of interest of
Rs. 3,80,408/- (IGST Rs. 3,59,786/-, CGST Rs. 10,311/- and SGST
Rs. 10,311/-) on ITC availed in respect of supplies for which the
value and tax were not paid to the suppliers within one hundred and
eighty days from the date of the invoice, and reduced the penalty
from Rs. 48,040/- to Rs. 20,000/-.
Brief Facts
3. The Appellant is registered under the CGST Act (GSTIN
27AABPO2946E1ZT) and is engaged in the trading of plywood,
veneered panels and similar laminated wood. On an audit of its
records for the period 01.07.2017 to 31.03.2020 by the Central GST
Audit-II Commissionerate, Pune, two objections were
communicated to it by letter dated 07.06.2022, namely, that ITC
had been availed on invoices of a supplier whose registration had
been cancelled with retrospective effect, and that interest had not
been paid on ITC relating to supplies for which the suppliers had
not been paid within one hundred and eighty days. In its reply dated
13.06.2022, the Appellant contested both objections, contending
that the supplier was active when the credit was taken and had filed
its returns up to November 2018, and that the credit had been taken
after satisfying the conditions of Section 16(2) and the tax had been
paid by the supplier, so that a reversal would amount to double
taxation.
4. By Show Cause Notice No. CGST/Audit-II/Supdt/117/IAO/
2022-23 dated 10.03.2023 issued under Section 73(1) (“the SCN”),
the Appellant was called upon to show cause why (a) ITC of Rs.
31,115/- (IGST), availed on eight invoices of Shanmukh Traders
dated 18.07.2018 to 16.10.2018, should not be recovered with
interest and penalty, the supplier’s registration having been
cancelled with effect from 03.07.2017; and (b) interest of Rs.
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3,80,408/- should not be recovered, with penalty, on ITC relating to
supplies for which the suppliers had not been paid within one
hundred and eighty days. For the second demand, the SCN relied on
the second proviso to Section 16(2) and on Rule 37.
5. By the OIO, the adjudicating authority confirmed the demand
of ITC of Rs. 31,115/- (IGST) with interest under Section 50 and
the demand of interest of Rs. 3,80,408/- under Section 50(3), and
imposed penalties under Section 73(9) read with Section 122(2)(a)
of Rs. 10,000/- on the ITC demand and Rs. 38,040/- on the interest.
The order was passed after a personal hearing on 21.04.2023 and
three further opportunities, on 31.10.2023, 07.11.2023 and
22.11.2023, at none of which the Appellant appeared.
6. The Appellant filed its first appeal on 09.04.2024. Earlier, on
13.02.2024, it had applied for rectification of the summary of the
OIO in FORM GST DRC-07, which showed Rs. 3,90,901/- as
IGST tax instead of Rs. 31,115/- (ARN AD2702240229339).
7. The first appellate authority framed two issues: whether the
ITC of Rs. 31,115/- was admissible, and whether the interest of Rs.
3,80,408/- had been rightly confirmed. On the first, it found that the
Appellant had not produced the tax invoices, proof of payment or
supplier’s certificate needed to establish the conditions of Section
16(2), the burden of which lay on it under Section 155. It held that
the decisions cited by the Appellant did not assist it in the absence
of such documents, and that interest on the credit followed. On the
second, it held that, the suppliers not having been paid within one
hundred and eighty days, the Appellant was required to reverse the
credit with interest under Section 50. It then took up the penalty. It
found that the minimum penalty on the ITC demand, aggregated
under the proviso to Section 20 of the IGST Act, was Rs. 20,000/-,
and that the penalty levied on the interest could not stand.
8. On 21.01.2025, the Appellant paid Rs. 31,115/- (IGST) for
2018-19 through FORM GST DRC-03 (ARN AD2701250586060),
by debit to its electronic credit ledger and without interest.
9. The present appeal was filed on 02.03.2026 and registered as
APL/9/PUN/2026 on 24.07.2026.
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Contentions of the Parties
The Appellant
10. The grounds of appeal raise four contentions. It is contended,
first, that the summary in FORM GST DRC-07 showed IGST tax of
Rs. 3,90,901/- in place of Rs. 31,115/-, the interest having been
entered in the tax column; that the pre-deposit was computed on
that figure; and that the application for rectification had not been
acted upon. It is contended, next, that the Appellant satisfied every
condition of Section 16(2) in respect of the invoices of Shanmukh
Traders, and that the tax demanded should be adjusted against the
excess pre-deposit. On the interest, it is contended that Rule 37, as
it stood for 2018-19, required the details to be furnished in FORM
GSTR-2, which was never made operational, so that compliance in
the prescribed manner was impossible. It is further contended that,
since Rule 37(3) runs interest until the amount added to the output
tax liability is paid, and there was no means of adding it, no interest
can be charged; and that the amendment of Rule 37 by Notification
No. 26/2022-Central Tax dated 26.12.2022, effective from
01.10.2022, does not apply to the period. Lastly, it is contended that
the Appellant faced financial hardship during the COVID-19
pandemic and had agreed with its suppliers to pay them after two
years, so that there was no “failure to pay”. The Appellant prays
that the impugned order be set aside, the interest and penalty
quashed, and the excess pre-deposit adjusted.
The Respondent
11. In its reply dated 01.09.2026, furnished through the Assistant
Commissioner, CGST, Division-I (Shivaji Nagar), Pune-II
Commissionerate, the Respondent states that the GSTN back-office
portal shows the payment of Rs. 31,115/- (IGST) for April 2018 to
March 2019 by DRC-03 (ARN AD2701250586060), with nil
interest and penalty. On the interest, it is contended that, even if the
Appellant had no means of reversing the credit, Rule 37 required it
to pay an amount equal to the credit, with interest under Section 50,
in the return in FORM GSTR-3B for the tax period following the
expiry of one hundred and eighty days from the date of the invoice.
It is contended that the Appellant thus had the option of paying the
liability in respect of the supplies not paid for within that period. It
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is further contended that Notification No. 26/2022-Central Tax only
added the option of reversal to make compliance easier, the
mechanism having existed in Rule 37 before it. The reply does not
deal with the ITC of Rs. 31,115/-.
Proceedings before the Tribunal
12. The appeal was heard on 28.07.2026, 11.08.2026,
24.08.2026, 08.09.2026, 18.09.2026 and 05.10.2026. The learned
Authorised Representative for the Appellant reiterated the grounds
of appeal. He made no submission on the computation of the
interest of Rs. 3,80,408/-. He informed the Bench that the summary
in FORM GST DRC-07 has since been rectified. Shri Lokesh
Sharma, Assistant Commissioner, appeared for the Respondent and
reiterated its reply. On 26.10.2026, when the matter was listed for
orders, none appeared for the Appellant; Shri Lokesh Sharma
appeared for the Respondent, and the matter was adjourned to
29.10.2026 for pronouncement.
Points for Determination
13. Having heard both sides and perused the record, we find that
the following points arise for determination:
(i) Whether the denial of ITC of Rs. 31,115/-, with
interest, calls for interference;
(ii) Whether the Appellant is liable to interest of Rs.
3,80,408/- for not paying its suppliers within one hundred
and eighty days during 2018-19;
(iii) Whether the penalty of Rs. 20,000/- calls for
interference; and
(iv) Whether the ground relating to the summary in FORM
GST DRC-07 survives.
Discussion and Findings
Point (i): the ITC of Rs. 31,115/-
14. The SCN proposed the recovery on the footing that, the
supplier’s registration having been cancelled with effect from
03.07.2017, the tax charged on the invoices may not have been paid
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to the Government, so that clause (c) of Section 16(2) was not
satisfied (para 3.3). The Appellant’s answer, as noted in paragraph
3, was that the supplier was active when the credit was taken. The
first appellate authority rested its finding not on the cancellation but
on the absence of any document establishing the conditions of
Section 16(2) (paragraph 7 above).
15. Section 155 of the CGST Act provides:
Where any person claims that he is eligible for input tax
credit under this Act, the burden of proving such claim
shall lie on such person.
16. Before us, the ground is pleaded as a bare assertion that the
conditions of Section 16(2) were satisfied. No invoice, record of
payment to Shanmukh Traders, evidence of transport or receipt of
the goods, or ledger of the supplier has been filed, and no further
material was placed at the hearing. The grounds themselves ask that
the tax be adjusted against the excess pre-deposit, and the Appellant
has since paid it (paragraph 8 above). On this record, the Appellant
has not discharged the burden that Section 155 casts on it. We do
not, therefore, decide whether the retrospective cancellation of a
supplier’s registration can by itself justify the denial of credit.
17. Interest under Section 50 is consequential on the
confirmation of the credit. The OIO confirmed it “at applicable
rates” without quantifying it (para 11(ii)), and the first appellate
authority upheld it. The proper officer shall quantify it in
accordance with Section 50. Point (i) is answered in the negative.
Point (ii): interest of Rs. 3,80,408/-
18. For the period in dispute, the second and third provisos to
Section 16(2), as they stood before their amendment by the Finance
Act, 2023 with effect from 01.10.2023, read:
Provided further that where a recipient fails to pay to the
supplier of goods or services or both, other than the
supplies on which tax is payable on reverse charge basis,
the amount towards the value of supply along with tax
payable thereon within a period of one hundred and
eighty days from the date of issue of invoice by the
supplier, an amount equal to the input tax credit availed
by the recipient shall be added to his output tax liability,
along with interest thereon, in such manner as may be
prescribed:
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Provided also that the recipient shall be entitled to avail
of the credit of input tax on payment made by him of the
amount towards the value of supply of goods or services
or both along with tax payable thereon.
19. Rule 37, as it stood before its amendment by Notification No.
19/2022-Central Tax dated 28.09.2022 with effect from 01.10.2022,
provided, so far as is material:
(1) A registered person, who has availed of input tax
credit on any inward supply of goods or services or both,
but fails to pay to the supplier thereof, the value of such
supply along with the tax payable thereon, within the
time limit specified in the second proviso to sub-section
(2) of section 16, shall furnish the details of such supply,
the amount of value not paid and the amount of input tax
credit availed of proportionate to such amount not paid
to the supplier in FORM GSTR-2 for the month
immediately following the period of one hundred and
eighty days from the date of the issue of the invoice: …
(2) The amount of input tax credit referred to in sub-rule
(1) shall be added to the output tax liability of the
registered person for the month in which the details are
furnished.
(3) The registered person shall be liable to pay interest at
the rate notified under sub-section (1) of section 50 for
the period starting from the date of availing credit on
such supplies till the date when the amount added to the
output tax liability, as mentioned in sub-rule (2), is paid.
20. The impugned order quotes the second proviso and Rule 37
in their amended forms (paras 9.2–9.3), and the Respondent’s reply
quotes Rule 37 in the same form. Those versions do not apply to
2018-19, and the Appellant is right that the amendments, including
Notification No. 26/2022-Central Tax, do not govern the period in
dispute. That does not, however, assist the Appellant. The SCN set
out the provisions as they stood for that period (paras 4.2–4.3).
Under them, as under the amended text, where a recipient did not
pay the supplier within one hundred and eighty days, an amount
equal to the credit was to be added to its output tax liability, with
interest.
21. The liability to interest arises under the Act itself. The second
proviso provides that, where the supplier is not paid within one
hundred and eighty days, an amount equal to the credit “shall be
added to his output tax liability, along with interest thereon, in such
manner as may be prescribed”. What was left to the Rules was only
the manner. The non-operation of FORM GSTR-2 affected the
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mode of reporting, not the liability that the proviso creates.
Throughout the period, returns were furnished in FORM GSTR-3B,
which provided for the reversal of credit, and any amount due could
be paid voluntarily under Section 73(5), with intimation in FORM
GST DRC-03 under Rule 142(2). It is not the Appellant’s case that
it attempted to reverse the credit or pay the interest and was
prevented from doing so. The maxim lex non cogit ad impossibilia
has no application where compliance was possible and was not
attempted.
22. It is argued that, since Rule 37(3) runs interest only “till the
date when the amount added to the output tax liability … is paid”,
no interest can run where the amount was never added. That reading
would make the liability depend on the recipient’s own default: a
recipient who reversed the credit would pay interest, while one who
did not would escape it. A provision is not to be read so as to let a
person take advantage of its own default. Sub-rule (3) runs interest
“from the date of availing credit”, and the end-point it fixes
assumes compliance with sub-rules (1) and (2). It cannot be
invoked by a recipient who did not comply, to extinguish the
liability.
23. The Appellant’s eventual payment of its suppliers does not
assist it. The third proviso entitles a recipient to avail the credit
again once it pays the supplier. The scheme therefore contemplates
late payment: the credit is reversed with interest when the period
expires, and re-availed on payment. The failure of which the second
proviso speaks is a failure to pay “within a period of one hundred
and eighty days”, not a failure ever to pay. Were it otherwise, the
third proviso would have nothing to operate on. The contrary
argument, advanced before the first appellate authority and repeated
in the grounds, cannot be accepted.
24. The pleas of financial hardship during the COVID-19
pandemic and of an agreement with the suppliers to pay after two
years do not assist the Appellant. The period of one hundred and
eighty days is fixed by the second proviso. It cannot be enlarged by
agreement between the supplier and the recipient, and no relaxation
of that period is shown to apply to the invoices of 2018-19.
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25. The Appellant has not disputed the computation of the
interest at any stage, whether before the adjudicating authority, the
first appellate authority or this Tribunal. It has not challenged the
period, the invoices or the arithmetic on which the demand rests.
26. Point (ii) is answered in the affirmative. The interest of Rs.
3,80,408/- is payable.
Point (iii): penalty
27. Section 73(9) of the CGST Act provides for “a penalty
equivalent to ten per cent. of tax or ten thousand rupees, whichever
is higher”. As regards integrated tax, the fourth proviso to Section
20 of the IGST Act reads:
Provided also that in cases where the penalty is leviable
under the Central Goods and Services Tax Act and the
State Goods and Services Tax Act or the Union Territory
Goods and Services Tax Act, the penalty leviable under
this Act shall be the sum total of the said penalties.
28. Ten per cent of the tax of Rs. 31,115/- is Rs. 3,111.50, which
is below the minimum of Rs. 10,000/-. The penalty under each of
the Central and State Acts is therefore Rs. 10,000/-, and under the
IGST Act, by virtue of the fourth proviso, Rs. 20,000/-. That is the
penalty the impugned order imposed. No ground is urged against
the penalty as such. Its setting aside is sought only as consequential
relief, and that prayer fails with the other grounds. Point (iii) is
answered in the negative.
Point (iv): the summary in FORM GST DRC-07
29. The first ground concerned the summary in FORM GST
DRC-07, which showed Rs. 3,90,901/- as tax although the OIO
fixes the tax at Rs. 31,115/- and states the interest separately
(paragraph 6 above; OIO para 11). The learned Authorised
Representative for the Appellant informed us at the hearing that the
summary has since been rectified. That ground therefore does not
survive. The adjustment of the pre-deposit, which the Appellant
also seeks, is provided for in the operative directions below. Point
(iv) is answered in the negative.
Order
30. In view of the above findings, the following order is passed:
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(a) The appeal is dismissed.
(b) The impugned order dated 25.11.2024 is upheld.
(c) The demand accordingly stands determined as follows:
tax of Rs. 31,115/- (IGST); interest under Section 50 on that
tax (IGST), to be quantified as stated in paragraph 17;
interest of Rs. 3,80,408/- (IGST Rs. 3,59,786/-, CGST Rs.
10,311/- and SGST Rs. 10,311/-) on ITC relating to supplies
not paid for within one hundred and eighty days; and penalty
of Rs. 20,000/- (IGST).
(d) The proper officer shall quantify the interest on the tax,
adjust the pre-deposit of Rs. 39,091/- (debit entry
DI2704240020305 dated 09.04.2024) and the payment of Rs.
31,115/- made by DRC-03 (ARN AD2701250586060 dated
21.01.2025) against the demand so determined, and
communicate to the Appellant the balance payable, if any.
(e) No order as to costs.
(Final Order pronounced in the open court on 29.10.2026)
Digitally signed by
NIRMAL KUMAR SOREN
Date: 2026.10.29
16:33:16 +05'30'
NIRMAL
KUMAR SOREN
SHRIDHAR
MAHADEO
BHOSALE
Digitally signed by SHRIDHAR
MAHADEO BHOSALE
Date: 2026.10.29 16:33:46
+05'30'
(Dr. Nirmal Kumar Soren)
(Shridhar Mahadeo Bhosale)
Member (Technical)
Member (Judicial)
Dated: 29.10.2026
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FORM GST APL-04A
[See rule 113(2)]
Summary of the order and demand after issue of order by the Goods and Services Tax Appellate
Tribunal
Whether remand order No
Order Reference No.
Date of order 29.10.2026
1. GSTIN / Temporary ID / UIN 27AABPO2946E1ZT
2. Appeal Case Reference No. /
Date
APL/9/PUN/2026 dated 24.07.2026
3. Name of the appellant M/s Indermal Aidanmal Oswal, Pune (trade name: Bhikaji
Aidanmalji)
4. Name of the Respondent The Commissioner of Central Tax, Pune-II
5. Order appealed against
(a) Order Type
(b) Ref. Number / Date
(a) Demand
(b) Order-in-Appeal No. PUN-CT-APPII-ADC-000-229-2024-25
dated 25.11.2024, passed by the Additional Commissioner
(Appeals-II), Central Tax, Pune (arising from Order No. PUN-II-
CGST-SUPDT-DI-R-II/11/2023-24 dated 25.01.2024)
6. Personal Hearing (all hearing
dates)
28.07.2026, 11.08.2026, 24.08.2026, 08.09.2026, 18.09.2026 and
05.10.2026
7. Status of Order under Appeal Confirmed
8. Order in brief
The appeal against Order-in-Appeal dated 25.11.2024 (period April 2018 to March 2019) is dismissed and the
Order-in-Appeal is upheld. (i) ITC of Rs. 31,115/- (IGST) availed on invoices of a supplier whose registration
was cancelled with retrospective effect: denial upheld, the Appellant not having discharged the burden under
Section 155 of the CGST Act; the tax has been paid by DRC-03 dated 21.01.2025. Interest under Section 50 on
this amount is to be quantified by the proper officer. (ii) Interest of Rs. 3,80,408/- (IGST Rs. 3,59,786/-, CGST
Rs. 10,311/-, SGST Rs. 10,311/-) on ITC relating to supplies not paid for within 180 days: upheld under the
second proviso to Section 16(2) of the CGST Act read with Rule 37(3) of the CGST Rules as then in force; the
non-operation of FORM GSTR-2 does not extinguish the liability. (iii) Penalty of Rs. 20,000/- (IGST) under
Section 73(9) of the CGST Act read with the fourth proviso to Section 20 of the IGST Act: upheld. (iv) The
ground relating to FORM GST DRC-07 does not survive, the summary having been rectified. The proper
officer shall quantify the interest at (i), adjust the pre-deposit of Rs. 39,091/- (09.04.2024) and the payment of
Rs. 31,115/- by DRC-03 (21.01.2025) against the demand so determined, and communicate the balance
payable, if any. No order as to costs.
9. If demand order, then whether demand quantified: Yes — except interest under Section 50 on the tax
of Rs. 31,115/-, which is to be computed by the proper officer (see item 8).
Interest under Section 50 on the tax of Rs. 31,115/- (IGST) is not included in Section-I; it is to be computed by the proper officer. Disputed amounts are
those confirmed by the Order-in-Appeal. The Appellant's FORM GST APL-05 shows interest in dispute as Rs. 4,01,030/-, which counts the CGST and
SGST interest twice.
Section-I
Particulars Central tax State/UT tax Integrated tax Cess Total
Disputed
Determined
Disputed
Determined
Disputed
Determined
Disputed
Determined
Disputed
Determined
Amount
Amount
Amount
Amount
Amount
Amount
Amount
Amount
Amount
Amount
1 2 3 4 5 6 7 8 9 10 11
(a) Tax 0 0 0 0 31,115 31,115 0 0 31,115 31,115
(b) Interest 10,311 10,311 10,311 10,311 3,59,786 3,59,786 0 0 3,80,408 3,80,408
(c) Penalty 0 0 0 0 20,000 20,000 0 0 20,000 20,000
(d) Fees 0 0 0 0 0 0 0 0 0 0
(e) Others 0 0 0 0 0 0 0 0 0 0
(f) Refund 0 0 0 0 0 0 0 0 0 0
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Section-II
Place of Supply
Demand Tax Interest Penalty Other Total
/ Name of
State/UT
Andhra Pradesh Amount in dispute 31,115 3,59,786 20,000 0 4,10,901
Andhra Pradesh Amount
Determined
31,115 3,59,786 20,000 0 4,10,901
Place of supply as recorded in DRC-03 dated 21.01.2025 (supplier GSTIN 37DERPM0149Q1ZN).
10. For other orders and demand orders which are not quantified: Not applicable.
11. If remanded with directions: Not applicable.
Section-III (Anti-profiteering) — 12. Order in brief: Not applicable.
Place: Pune
Date: 29.10.2026
Digitally signed by
NIRMAL KUMAR SOREN
Date: 2026.10.29
16:32:33 +05'30'
NIRMAL
KUMAR SOREN
Dr. Nirmal Kumar Soren,

Member (Technical)
GST Appellate Tribunal, Pune Bench

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