Taxpayers Facing Assessments Due to ITC Claimed Under the Wrong Head- Relief by Kerala HC
Taxpayers undergoing assessments for ITC claimed under the wrong head can find relief based on a recent Kerala High Court judgment in Rejimon Padickapparambil Alex vs Union of India (WA No. 54 of 2024). The court quashed an order demanding payment of CGST and SGST wrongly utilized instead of IGST in GSTR-3B.
Case Summary:
For the period July 2017 to March 2018, the petitioner inadvertently misreported IGST credit in GSTR-3B by splitting it into CGST and SGST components, resulting in a mismatch with GSTR-2A. Despite this technical error, it was undisputed that the IGST credit was appropriate and utilized for legitimate GST liabilities. A Show Cause Notice was issued to the petitioner based on this mismatch.
The Kerala High Court relied on a similar case from Bengaluru and ruled in favor of the taxpayer, citing the following key arguments:
1. Section 77 of CGST Act, 2017: This provision allows refunds of taxes paid under the wrong head, supporting the adjustment of CGST/SGST ITC for IGST.
2. Revenue Neutrality: Since the IGST credit was used to pay CGST and SGST liabilities, there was no revenue loss to the government.
3. ITC Utilization Rules (Section 49): IGST credit can be legally utilized to settle CGST and SGST liabilities. The petitioner’s actions were consistent with these provisions.
4. Circular No. 192/04/2023-GST: ITC is treated as a pooled fund across IGST, CGST, and SGST, and interest liability only arises if the total credit balance falls below the wrongly availed amount.
The High Court concluded that the petitioner’s error was inadvertent and technical, with no wrongful credit availment under Section 73 of the CGST Act. The court directed the GST Council to issue appropriate directions to resolve such issues in the future.
Additional Reference:
The Madras High Court, in M/s. Kondamma Trading vs The Assistant Commissioner of CGST & Central Excise (WP No. 29369 of 2023), allowed application for rectification of order under section 161 of the CGST Act and directed to pass order to change the ITC claim from one head to another head, emphasizing the genuineness of claims.
This judgment covers the importance of addressing technical errors in ITC claims through a balanced approach while adhering to legislative provisions.
The copy of the order is as under:
