GST Tribunal Remands ₹47.43 Lakh Rule 42 ITC Issue for Fresh Decision, Upholds ₹1.78 Lakh Demand Against Dealer

The Revenue challenged the First Appellate Authority’s order dated 18 December 2024 concerning the respondent’s input tax credit (ITC) for FY 2019–20.

The dispute included a Rule 42 ITC-reversal demand of ₹47,43,843.14, an ITC claim of ₹74,325 arising from a GSTR-3B/GSTR-2A mismatch, and ITC of ₹59,867.50 relating to Savorit Limited.

The Tribunal upheld the First Appellate Authority’s treatment of the mismatch and Savorit Limited claims, but found its decision on the Rule 42 demand insufficiently reasoned.

Section 17(2) of the CGST Act, read with Rules 42 and 43, governs apportionment and reversal of ITC attributable to exempt supplies and common credit.

CBIC Circular No. 183/15/2022-GST addresses verification of ITC claims affected by differences between GSTR-3B and GSTR-2A; the Tribunal accepted supporting supplier clarification, invoices, and banking records in applying it.

The Tribunal held that the First Appellate Authority had not adequately explained its deletion of the Rule 42 demand: it had not recorded the relevant turnover figures or common-credit details, or verified whether separate accounts were maintained for taxable goods and exempt papad supplies.

The decision on that issue was therefore non-speaking and required fresh adjudication.

By contrast, the ₹74,325 mismatch claim was supported by the materials accepted under Circular No. 183/15/2022-GST, so the relief was upheld.

The Revenue’s objection regarding Savorit Limited also failed because the ₹59,867.50 ITC had already been disallowed for want of proper reconciliation.

It upheld the ₹1,78,515 demand and the relief granted on the ₹74,325 mismatch claim, and rejected the Revenue’s objection concerning Savorit Limited ITC.

It set aside the deletion of the Rule 42 ITC-reversal demand and remanded that issue to the First Appellate Authority for fresh adjudication.