Suncraft Energy Pvt. Ltd. vs Assistant Commissioner, State Tax (2023)

1. Background of the Case

This case is about the Input Tax Credit (ITC) system under the Goods and Services Tax (GST) law. ITC is the right of a registered taxpayer to claim credit for the GST already paid on purchases, which can be used to reduce the GST liability on sales.

The central question was:

👉 Can ITC be denied to a buyer just because the seller did not upload invoices in GSTR-1, and hence the buyer’s GSTR-2A did not reflect those invoices, even though the buyer fulfilled all other legal conditions under Section 16(2) of the GST Act?

This case became important because many businesses faced notices from tax authorities citing mismatches between GSTR-2A (auto-populated from supplier data) and GSTR-3B (self-declared by taxpayer).

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2. Facts of the Case

1. The Assessee (Petitioner):
   • Suncraft Energy Pvt. Ltd., a company engaged in the business of solar energy systems.
2. The Transaction:
   • The company purchased goods/services and paid the GST charged by its supplier.
   • It filed GSTR-3B returns, claiming ITC on those purchases.
3. The Problem:
   • The supplier did not upload some invoices in its GSTR-1 return.
   • As a result, these invoices did not appear in Suncraft’s GSTR-2A auto-generated form.
4. The Action by Authorities:
   • The Assistant Commissioner issued a show-cause notice demanding reversal of ITC, arguing that ITC cannot be claimed if invoices are not reflected in GSTR-2A.
   • The order asked the company to pay back the ITC with interest and penalty.
5. The Defense by the Company:
   • Suncraft argued that it had complied with all conditions under Section 16(2):
     • It had valid tax invoices.
     • Goods/services were received.
     • Tax was actually paid to the supplier.
     • Returns were filed.
   • The mismatch between GSTR-2A and GSTR-3B is only a technical issue, not grounds to deny ITC.

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3. Statutory Framework

The key provisions of the Central Goods and Services Tax (CGST) Act, 2017 involved were:

• Section 16(2): ITC can be claimed if the buyer has a tax invoice, has received goods/services, and the supplier has paid tax to the government.
• Section 41 (Pre-amendment): Allowed self-assessment of ITC by taxpayers.
• Rule 36 of CGST Rules: Provided documentary conditions for availing ITC.

Additionally, the government had issued Press Releases (18 October 2018 and 4 May 2018) clarifying that GSTR-2A is only a facilitative tool and that ITC should not be denied only due to mismatch.

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4. Issues Before the Court

1. Whether ITC can be denied to the buyer solely because the seller failed to upload invoices in GSTR-1, causing mismatch in GSTR-2A?
2. Whether GSTR-2A is decisive and binding for determining ITC eligibility?
3. Whether the department should proceed against the defaulting supplier instead of punishing the bona fide buyer?

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5. Arguments

A. Revenue (Tax Department)

• GSTR-2A is generated from the supplier’s GSTR-1.
• If an invoice is not visible in GSTR-2A, it means the supplier did not pay tax.
• Therefore, ITC should be reversed from the buyer.

B. Petitioner (Suncraft Energy Pvt. Ltd.)

• All conditions under Section 16(2) were satisfied.
• The company had proof of payment of tax to the supplier.
• GSTR-2A is only a reference tool; it cannot override statutory rights.
• Denial of ITC punishes the buyer for the fault of the supplier.

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6. High Court’s Findings

The Calcutta High Court made the following important observations:

1. Conditions of Section 16(2):
   • If the buyer has valid invoices, has received goods/services, and has paid the supplier, ITC cannot be denied.
2. Nature of GSTR-2A:
   • GSTR-2A is only a facilitative document for the taxpayer’s reference.
   • It does not have the force of law to determine ITC eligibility.
3. Liability of Supplier vs Buyer:
   • If the supplier has defaulted in filing returns or paying tax, action must be taken against the supplier.
   • The buyer cannot be automatically penalized unless fraud, collusion, or connivance is established.
4. Press Releases of CBIC:
   • The government itself had clarified that ITC is not to be denied simply because invoices are not reflected in GSTR-2A.
5. Principle of Natural Justice:
   • Before reversing ITC, authorities must verify facts and cannot act mechanically based on mismatch reports.

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7. Supreme Court’s Role

• The Revenue filed Special Leave Petitions (SLPs) against the Calcutta High Court order.
• On 14 December 2023, the Supreme Court dismissed the SLPs, thereby affirming the High Court judgment.
• This dismissal gave the High Court’s ruling finality and nationwide persuasive value.

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8. Judgment (In Simple Terms)

• ITC cannot be denied to a buyer merely because of mismatch between GSTR-2A and GSTR-3B.
• GSTR-2A is not conclusive proof; it is only a facilitation tool.
• If the buyer has fulfilled all Section 16(2) conditions, ITC must be allowed.
• The department should act against the supplier who failed to upload invoices, not punish the buyer.
• Automatic reversal of ITC due to supplier’s default is not permitted.

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9. Significance of the Case

1. Protection of Buyers:
   • Genuine buyers cannot lose ITC because of supplier’s mistakes.
2. Clarification on GSTR-2A:
   • Establishes that GSTR-2A is not the ultimate document for ITC verification.
3. Future Impact:
   • The judgment strengthens taxpayers’ rights and reduces arbitrary ITC reversals.
   • It sets a precedent for other High Courts and GST tribunals across India.

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10. Conclusion

The Suncraft Energy judgment (2023) is a landmark ruling that safeguarded the right to ITC for honest taxpayers. It confirmed that GSTR-2A is not conclusive and that ITC cannot be denied merely due to mismatch between GSTR-2A and GSTR-3B.

By dismissing the Revenue’s appeal, the Supreme Court ensured that the burden of supplier default should not unfairly fall on the buyer.