GSTAT Ghaziabad set aside a ₹2.50 crore demand, with interest and penalty, because the notice never explained why restoring IGST paid under the wrong head breached Section 16(2), and ordered reconciliation instead.

GSTAT Ghaziabad has held that an input tax credit demand cannot stand where the show cause notice (SCN) merely reproduces Section 16(2) of the CGST Act without explaining why a taxpayer’s restoration of IGST credit, earlier used to pay tax under the wrong head, was wrongful. [Fiberhome India Private Limited v. Lalit Mishra, Additional Commissioner, Noida & Ors., 2026-juristway.com-3140-GSTAT(Ghaziabad)-GST]

The Bench of Dr. Sanjay Kumar Chandhariyavi, Member (Judicial), and Sungita Sharma, Member (Technical), allowed the second appeal under Section 112 and set aside tax of ₹2,50,42,960, interest of ₹1,84,06,576 and penalty of ₹25,04,296 under Section 73(11).

In 2017-18 the appellant treated supplies to BSNL as inter-State and paid IGST through its electronic credit ledger. While preparing GSTR‑9 and GSTR‑9C, it found the supplies were intra-State, paid CGST and UPGST of ₹1,25,21,480 each through DRC‑03 dated 4 Feb 2020, and took a matching IGST credit in GSTR‑3B for February 2020. The Department treated this as excess credit, and the first appellate authority held that the appellant should have sought a refund.

The appellant argued that the entry restored credit already used and was not fresh credit on purchases, relying on Section 77 of the CGST Act, Section 19 of the IGST Act and Circular No. 162/18/2021-GST. The Revenue argued that credit can be restored only through the statutory refund route, citing Union of India v. Bharti Airtel Ltd. & Ors. ((2021) 13 SCC 1 / 2021 SCC OnLine SC 1006).

The Bench found that the SCN stated a conclusion but not which condition of Section 16(2) had failed. Citing Commissioner of Central Excise v. Brindavan Beverages (P) Ltd. ((2007)5 SCC 388) and Commissioner of Customs v. Toyo Engineering India Ltd. ((2006) 7 SCC 592), it held that Section 75(7) bars confirming a demand on grounds not stated in the SCN, and found the adjudication order non-speaking.

The Bench did not endorse the self-credit. IGST paid as output tax does not become input tax under Section 2(62), and the correct route was a refund under Section 19(1) of the IGST Act read with Rule 89(1A). But an irregular method of correction “cannot validate a defective show-cause notice.” Interest also failed: Section 77(2) excludes it on the correct-head liability, and Section 50(3) with Rule 88B requires findings of utilisation, not mere availment.

The CGST and UPGST paid through DRC‑03 must be recognised against the relevant supplies. The competent authority must reconcile the original IGST payment with the later recredit, and the taxpayer is to receive no duplicate refund or credit. No costs were awarded.

2026-juristway.com-3140-GSTAT(Ghaziabad)-GST