The Karnataka High Court has set aside the order denying the transactional ITC claims under the GST regime and remanded the case for fresh consideration, keeping that there was a non-consideration of documents in TRAN-1 and TRAN-2 credit claims.
The bench of Justice S. Sunil Dutt Yadav stated that the previous orders appeared to have been passed in the lack of specific pertinent documents, which were now being produced by the applicant. It is effective to set aside the impugned order and remit the case before the adjudicating authority for reconsideration after analysing the newly filed materials.
The petitions contesting two separate Orders-in-Original issued by the Assistant Commissioner of Central Tax, South Division-3, Bengaluru, which had rejected the taxpayer’s claim to carry forward pre-GST credits into the GST regime.
The authorities had denied the TRAN-1 claim as per the quantity and value of the inputs did not match with the TRAN credit taken. The adjudicating authority said that the applicant didn’t kept a detailed stock register exhibiting the description, quantity, and value of goods held in stock.
Likewise, the TRAN-2 claim was denied because the taxpayer allegedly did not provide the information about the inputs maintained in stock as on July 1, 2017, and losses to produce invoices or documents proving tax payment that could support the credit carried forward to the electronic credit ledger.
As per such findings, the department validated the demand and disallowed the transitional credit.
The applicant mentioned that the tax authorities had wrongly acknowledged the documents submitted earlier, along with the materials referred to in the email communication placed on record as Annexure-E.
According to the taxpayer, the denial of the credit was based on the claims of a mismatch, without validating the supported records available with the department.
Applicant is willing to show the correctness of the credit claim via furnishing additional records to the adjudicating authority.
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At the time of proceedings, the HC asked the applicant to appear before the assessing authority and deliver the appropriate materials to confirm its claim.
The applicant, as per the same direction, appeared before the authority on the date 25 February 2026 and filed the documents along with the records that were not furnished to the department previously.
Afterwards, the assessing authority asked for the other documents, like the CA-certified closing stock of goods as on 30 June 2017, Purchase invoice copies, and Sales register for the period July to December 2017.
Before the court, the department ensured that the proceedings had taken place and that the authority had asked for these additional documents.
Subsequently, the Court quashed the Orders-in-Original rejecting TRAN-1 and TRAN-2 credits and asked the authority to undertake a fresh adjudication.
The Court specified that the claims of the department, as well as the taxpayer, remain open, permitting the adjudicating authority to again investigate the case independently as per the provided documents.
| Case Title | M/S Bhawar Life Style vs. Assistant Commissioner Central Tax |
| Case No | IN W.P. No. 1664/2026 |
| For Petitioner | SRI. E.I.Sanmathi |
| For Respondent | SRI. Aravind V. Chavan |
| Karnataka High Court | Read Order |
