Demand Raised Under Section 16(2)(aa) Cannot Be Confirmed Under Section 16(2)(c): GSTAT Ernakulam

The Ernakulam Bench of the GST Appellate Tribunal set aside an ITC demand for 2018-19 because the order rested on a ground never put to the taxpayer in the show cause notice.

GSTAT Ernakulam has held that a show cause notice (SCN) alleging breach of Section 16(2)(aa) of the CGST Act cannot culminate in a demand confirmed for breach of Section 16(2)(c), as Section 75(7) bars confirmation on grounds other than those in the notice. It set aside an input tax credit (ITC) demand of ₹3,06,504 with interest and penalty. [MPS Steels, Palakkad v. Commissioner of CGST & Ce, Kochi, 2026-juristway.com-3290-GSTAT(Ernakulam)-GST]

The Bench of Subramanya Rayaprol, Vice-President, and Ramamoorthi Sriram, Member (Technical), allowed the appeal, with Ramamoorthi Sriram writing the order. The SCN dated 20 Nov 2023 alleged ineligible ITC on invoices of suppliers who had not filed GSTR‑3B for 2018-19, citing only Section 16(2)(aa). The appellant replied that clause (aa) took effect only from 1 Jan 2022, but the order-in-original confirmed the demand under Section 16(2)(c), and the appellate authority upheld it.

The appellate authority relied on Commissioner of Service Tax v. ITC Ltd. (2014) to hold that a wrong reference to a provision does not invalidate a notice, and found that the appellant had produced neither a certificate under Circular No. 183/2022-GST nor proof that the credit had since appeared in GSTR‑2A. Before the Tribunal, the Revenue’s representative acknowledged that the SCN invoked Section 16(2)(aa) and the order Section 16(2)(c).

The Bench found that the order-in-original was silent on the objection that clause (aa) was not in force, and that the charge under clause (c), which turns on whether the supplier actually paid the tax, was never put to the appellant. ITC Ltd. concerned a notice that set out all the facts but omitted a sub-clause; this was a case of wrong reference to a different condition, which left the appellant unaware of the case it had to meet.

Relying on Armour Security (India) Ltd v. Commissioner, CGST, Delhi East Commissionerate (2025), the Bench held that an SCN delineates the scope of the proceedings, and that the proceedings were vitiated by breach of Section 75(7). With the tax demand gone, interest and penalty also fell. The parts of the order-in-appeal confirming tax, interest and penalty on this ITC were set aside with consequential relief.

2026-juristway.com-3290-GSTAT(Ernakulam)-GST