In a significant GST litigation, M/s. Abhimaani Structures and Engineering Private Limited v. Superintendent of Central Tax (W.P. No. 35021 of 2025 (T-RES), Karnataka High Court, order dated 28 November 2025), the Karnataka High Court delivered a crucial ruling reinforcing the mandatory applicability of CBIC Circular No. 183/15/2022-GST dated 27 December 2022 in cases involving mismatches between Input Tax Credit (ITC) claimed in GSTR-3B and the ITC reflected in GSTR-2A for the financial year 2017-18.
Factual Background
During assessment proceedings for the financial year 2017-18, the GST authorities issued a show cause notice to Abhimaani Structures noting discrepancies between the ITC the taxpayer claimed in its GSTR-3B returns and the credit reflected in GSTR-2A. The department treated these discrepancies as evidence of ineligible ITC and, in November 2023, passed adjudication and summary orders under Section 73(9) of the Central Goods and Services Tax Act, 2017 (“CGST Act”) directing reversal of excess ITC without proper application of CBIC Circular No. 183.
The taxpayer approached the High Court by way of writ petition challenging these orders on the ground that the adjudicating authority failed to observe the procedure set out in the Circular, which was specifically issued to address such mismatches for FY 2017-18 and 2018-19.
What Is CBIC Circular No. 183/15/2022-GST?
The CBIC Circular No. 183, issued on 27 December 2022, was designed to provide clarity and a verification mechanism where there is a mismatch between ITC claimed in GSTR-3B and ITC as per GSTR-2A for FY 2017-18 and 2018-19 — years when GSTR-2A functionality was still evolving and many suppliers did not report data properly on the portal.
The Circular acknowledges that in early GST years:
- Suppliers might not have filed GSTR-1 at all, or may have filed incorrectly, resulting in ITC not flowing electronically into the recipient’s GSTR-2A;
- Certain invoices may have been omitted or reflected under wrong GSTINs, B2C instead of B2B classifications, etc.;
- The simple conditions for claiming ITC under Section 16 of the CGST Act were to be the basis for verification.
To ensure fairness, the Circular prescribes that if ITC was claimed in GSTR-3B but not reflected in GSTR-2A, the officer must:
- Ask the taxpayer for all invoices on which ITC was claimed but not reflected in GSTR-2A;
- Verify whether statutory conditions under Section 16 (invoice possession, receipt of goods/services, payment of tax) are met;
- Seek a certificate from the supplier or a CA/CMA (with a UDIN) confirming genuine supplies and tax payment — depending on value thresholds — before making any adverse order.
The Circular explicitly states that this procedure must be followed for all pending matters in scrutiny, audit, investigation or adjudication for FY 2017-18 and 2018-19.
Legal Issues Before the Court
The crux of the dispute was twofold:
- Whether the adjudicating authority could simply reverse ITC where an ITC discrepancy existed between GSTR-3B and GSTR-2A, without following the Circular’s process; and
- Whether the Circular’s procedure was merely directory (optional) or mandatory for authorities to apply in pending cases — even if the taxpayer did not expressly rely on it during proceedings.
High Court’s Findings and Legal Reasoning
The Karnataka High Court held decisively that:
1. Mandatory Nature of Circular No. 183
The Circular sets out a mandatory regime for verification of ITC mismatches for FY 2017-18/18-19, and cannot be ignored by adjudicating officers when dealing with pending cases. Its applicability does not depend on the taxpayer invoking it; the authority must apply it of its own motion in all pending matters.
The Court expressly relied on an earlier coordinate bench decision in R.S. Marketing and Logistics (P) Ltd. v Commercial Tax Officer where similar non-application of the Circular led to setting aside the adjudication order and remitting the matter for fresh consideration.
2. Rejection of “Mechanical” Reversals
The High Court found that the impugned ITC reversal order was passed mechanically on the ground of discrepancy alone, and without offering the taxpayer a chance to demonstrate eligibility via the Circular’s prescribed verification methods (supplier certificates, CA certificates, etc.). This violated the procedural safeguards and justice expected under law.
3. Remand with Opportunity to Tender Evidence
Accordingly, the Court quashed the demand and remitted the matter back to the jurisdictional officer for reconsideration afresh in accordance with law ― entitling the taxpayer to file additional submissions and documentation (including Circular-mandated certificates).
Notably, the Court left open any factual questions bearing on applicability to be decided by the authority on remand.
Significance of the Judgment
This ruling is a major reinforcement of procedural fairness in GST litigation involving ITC mismatches:
- It confirms that authorities cannot bypass the Circular’s procedure simply because a taxpayer did not explicitly invoke it.
- It provides taxpayers facing mismatch notices a legitimate opportunity to substantiate their claims using supplier confirmations or professional certificates — without immediate reversals.
- It underscores that Circulars issued by CBIC under Section 168 are not just advisory when they prescribe steps for pending matters.
For taxpayers, this means an added layer of procedural justice in ITC disputes relating to the “teething trouble” years of GST implementation, and a potential lifeline to retain genuine credits that were electronically mismatched due to earlier filing issues.