The Kerala High Court has held that proceedings under section 73 cannot be initiated for splitting Integrated Goods & Service Tax (IGST) amount towards Central Goods & Service Tax (CGST) and State Goods & Service Tax (SGST) through GSTR 3B.
The bench of Justice A.K.Jayasankaran Nambiar and Justice K. V. Jayakumar has observed that there has been no wrong availment of credit, and that the only mistake committed by the appellant was an inadvertent and technical one, where he had omitted to mention the IGST figures separately in Form GSTR 3A. The mistake was also insignificant because it is not in dispute that there was no outward supply attracting IGST that was effected by him.
The bench while addressing the insecurity of the department that the State might be deprived of its legitimate share of the IGST paid by the suppliers outside the State, stated that on the respondent State producing a copy of the judgment, along with a representation before the GST Council, the GST Council shall issue necessary directions to resolve the issue by taking note of the declaration in this judgment.
The appellant runs a proprietorship concern with the name and style ‘Padiken Silks’, and is a registered dealer on the rolls of the 5th respondent for the purposes of payment of GST. During the assessment year 2017-2018, and in particular, during the period from July 2017 to March 2018, the appellant received various inward supplies of goods, both inter-state and intrastate.
For the inter-state inward supplies, on which IGST (Integrated Goods and Services Tax) was paid by the supplier, the appellant had to avail input tax credit by resorting to a procedure whereby he had to show the IGST amount paid by the supplier, as the IGST paid by him in the Form GSTR 2A generated by him.
If there was no outward supply on which IGST had to be paid by him he had to show the same IGST amount as Credit available in the Form GSTR 3A and then split the IGST amount into the CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax) components in the said Form 3A before utilising the same for the purposes of payment of outward taxes.
However, on receipt of the IGST paid inward supplies from outside the State, the appellant, instead of showing the IGST component in the eligible credit details in Form GSTR-3B, inadvertently showed the IGST component as nil and added the bifurcated CGST and SGST components of IGST to the existing figures showing eligible CGST and SGST credit.
This resulted in a mismatch between Form GSTR 2A and Form GSTR 3B maintained in relation to the assessee. What is significant, however, is that it is undisputed that it was the amount shown as IGST in Form GSTR 2A that was split into the components of CGST and SGST and added to the corresponding columns in Form GSTR 3B.
The Assessing Authority noticed this mismatch and opined that this mismatch had resulted in the appellant utilising ‘unavailable credit’ towards payment of CGST and SGST on outward supplies. He therefore proceeded to issue a notice to the appellant demanding the return of the CGST/SGST amounts allegedly utilised in excess by the appellant.
The proceedings initiated through the notice culminated in order confirming the demand against the appellant.
It was order that was in the Writ Petition, on the contention that there had been no revenue loss involved in the exercise carried on by the appellant, and that there was no excess credit availed by the appellant.
The Single Judge, who considered the matter, noticed that the appellant had, by way of abundant caution, also sought a refund of the amounts demanded from him, from the credit that was available with the department consequent to the payment of IGST by the supplier outside the State. The Judge, therefore, merely directed the respondent to consider and pass orders on the refund application without actually pronouncing on the legality of the actions of the respondent.
The demand in order that was impugned in the Writ Petition was wholly unsustainable since there was admittedly no excess utilisation of credit since the appellant was entitled to take credit on the IGST paid on inter-state inward supplies.
The only mistake that was occasioned by the appellant was that he had not shown the IGST amounts separately in Form GSTR 3B against available credit and had resorted to an exercise of splitting the IGST amount towards CGST and SGST since he did not have any outward supply that attracted IGST.
The court held that the notice issued to the appellant, and the demand confirmed against him, were in proceedings initiated under Section 73 of the GST Act. The provisions are attracted only when it appears to a proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax has been wrongly availed or utilised for any reason. The case before us clearly reveals that there has been no wrong availment of credit, and that the only mistake committed by the appellant was an inadvertent and technical one, where he had omitted to mention the IGST figures separately in Form GSTR 3A.
The court held that the mistake was also insignificant because it is not in dispute that there was no outward supply attracting IGST that was effected by him. We therefore set aside the impugned judgment of the learned Single Judge and allow the Writ Petition by quashing order and declaring that the appellant shall not be seen as having availed excess credit for the purposes of initiating proceedings under Section 73 of the GST Act.
Case Details
Case Title: Rejimon Padickapparambil Alex Versus Union Of India
Case No.: WA NO. 54 OF 2024
Date: 26/11/2024
Counsel For Petitioner: R.Jaikrishna
Counsel For Respondent: Resmitha Ramachandran
