OUTPUT 1 — GST Show Cause Notice DRC-01 (ITC Mismatch)Date: 14/11/2024 Place: Mumbai The Assistant Commissioner, CGST Division III, Mumbai Central Commissionerate Subject: Response to Show Cause Notice (DRC-01) — Ref. No. CGST/MUM-C/DIV-III/DRC-01/2024-25/0189 dated 15/10/2024 — M/s Horizon Trading Company (GSTIN: 27AABCH1234K1Z5) — FY 2023-24 Q2 (July to September 2023) Without Prejudice Respected Sir/Madam, SECTION 1 — REFERENCE AND ACKNOWLEDGEMENT The assessee, M/s Horizon Trading Company, GSTIN 27AABCH1234K1Z5, engaged in wholesale trading of electronic components, hereby acknowledges receipt of Show Cause Notice in Form DRC-01 bearing reference number CGST/MUM-C/DIV-III/DRC-01/2024-25/0189 dated 15/10/2024, pertaining to FY 2023-24 Q2 (July to September 2023), proposing disallowance of Input Tax Credit (ITC) of ₹4,80,000 (Rupees Four Lakhs Eighty Thousand Only). This response is being filed on 14/11/2024 through the assessee's authorised representative CA Rajesh Mehta, ARN: ARN-SW-2300012345, within the stipulated due date. SECTION 2 — BACKGROUND AND FACTS The assessee is a registered taxpayer under the CGST Act 2017 with a consistent record of filing GSTR-1 and GSTR-3B returns within prescribed due dates. During Q2 of FY 2023-24, the assessee made bona fide business purchases of electronic components from M/s Prakash Distributors (GSTIN: 27AABCP9876K1ZX) supported by valid tax invoices, paying the full invoice value inclusive of GST. The ITC of ₹4,80,000 (Rupees Four Lakhs Eighty Thousand Only) was claimed in GSTR-3B for September 2023 on the basis of actual receipt of goods and payment of tax to the supplier. M/s Prakash Distributors subsequently filed their GSTR-1 for September 2023 on 28/11/2023, and the relevant invoices are now duly reflected in the assessee's GSTR-2B for November 2023, confirming the genuineness and completeness of the underlying transaction. SECTION 3 — GROUND-BY-GROUND RESPONSE Ground 1: ITC of ₹4,80,000 claimed in GSTR-3B for September 2023 not reflected in GSTR-2B for the same period. Response to Ground 1: The assessee submits that the ITC of ₹4,80,000 (Rupees Four Lakhs Eighty Thousand Only) pertains to genuine business purchases from M/s Prakash Distributors supported by valid GST-compliant tax invoices. The non-reflection in GSTR-2B for September 2023 arose solely due to the supplier's delayed filing of GSTR-1 — a matter entirely outside the assessee's control. Section 16(2)(aa) of the CGST Act 2017 requires ITC to be reflected in GSTR-2B; however, CBIC Circular No. 183/15/2022-GST dated 27/12/2022 clarifies that where mismatch arises from supplier default, the registered person may substantiate the claim through documentary evidence. All such evidence is enclosed. The Hon'ble Calcutta High Court in Suncraft Energy Pvt. Ltd. v. Assistant Commissioner of State Tax (2023) held that ITC cannot be denied to a bona fide purchaser on account of the supplier's default where actual receipt of goods and payment of tax are established. This ground is accordingly not maintainable. Ground 2: Supplier M/s Prakash Distributors has not filed GSTR-1 for September 2023, making ITC ineligible under Rule 36(4) of CGST Rules. Response to Ground 2: The assessee submits that M/s Prakash Distributors has since filed their GSTR-1 for September 2023 on 28/11/2023, and the subject invoices now appear in the assessee's GSTR-2B for November 2023. The requirement under Rule 36(4) of the CGST Rules, 2017 stands fulfilled. The temporary non-availability in GSTR-2B constituted a timing difference and not a permanent ineligibility. All conditions under Section 16(2) of the CGST Act — actual receipt of goods, tax charged and paid by the supplier, and return filed by the supplier — are now fully satisfied. CBIC Instruction No. 02/2022-GST further reinforces that proceedings should not be sustained where the underlying transaction is genuine and the supplier has filed subsequently. This ground is not maintainable. SECTION 4 — LEGAL AND JURISDICTIONAL SUBMISSIONS 4.1 The Hon'ble Supreme Court in Arise India Ltd. v. Commissioner of Trade and Taxes Delhi (2017) affirmed that ITC is a substantive vested right of a registered taxpayer and procedural lapses on the part of the supplier cannot extinguish the recipient's entitlement where genuine transactions are established through documentary evidence. 4.2 CBIC Circular No. 170/02/2022-GST dated 06/07/2022 explicitly provides that the department shall not deny ITC solely on the basis of GSTR-2B mismatch arising from supplier non-filing, provided the taxpayer furnishes adequate evidence of actual receipt of goods/services and payment of tax to the supplier. 4.3 Section 74 of the CGST Act 2017, invoked in the notice, requires proof of fraud, wilful misstatement, or suppression of facts. None of these ingredients are present — the ITC was claimed in good faith with full documentary support. At best, Section 73 of the CGST Act would be applicable, and even thereunder, no demand survives once the supplier's return has been filed and the ITC reconciled in GSTR-2B. SECTION 5 — LIST OF ENCLOSURES 1. Tax invoices from M/s Prakash Distributors for September 2023 (4 invoices) 2. GSTR-2B for November 2023 showing reconciled ITC of ₹4,80,000 3. Bank payment proof confirming full invoice value paid to supplier 4. M/s Prakash Distributors GSTR-1 filing acknowledgement dated 28/11/2023 5. GSTR-3B for September 2023 (filed copy) 6. ITC reconciliation statement — GSTR-3B vs GSTR-2B for FY 2023-24 Q2 7. Purchase register extract for Q2 FY 2023-24 8. GST registration certificate of M/s Prakash Distributors SECTION 6 — PRAYER AND CLOSING Without Prejudice In light of the factual submissions and documentary evidence placed on record, the assessee most respectfully prays that your good office may be pleased to: (i) Drop the proposed ITC disallowance of ₹4,80,000 (Rupees Four Lakhs Eighty Thousand Only) in its entirety; (ii) Consequentially drop the proposed demand, interest under Section 50, and penalty under Section 74 of the CGST Act 2017; and (iii) Close the proceedings initiated vide Show Cause Notice bearing reference number CGST/MUM-C/DIV-III/DRC-01/2024-25/0189 dated 15/10/2024. The assessee undertakes to produce any further documents or clarifications as may be required. Yours faithfully, ___________________________ CA Rajesh Mehta Authorised Representative ARN: ARN-SW-2300012345 For M/s Horizon Trading Company Date: 14/11/2024 Place: Mumbai