The Goods and Services Tax Appellate Tribunal (GSTAT), Thiruvananthapuram, has held that payment of tax under CGST and SGST instead of IGST because of a clerical mistake does not amount to non-payment or short payment attracting proceedings under Section 73 of the GST Acts.
The bench of Subramanya Rayaprol (Vice President) and Ramamoorthi Sriram (Technical Member) permitted the excess amount available under CGST and SGST to be set off against the IGST shortfall through the electronic credit ledger. However, it clarified that any balance remaining unpaid after the adjustment must be recovered in cash, along with interest under the applicable legal provisions.
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The dispute arose from a comparison of the taxpayer’s GSTR-1 and GSTR-3B returns for the relevant period. The department issued a show cause notice on December 18, 2023, under Section 73 of the CGST Act, alleging short payment of IGST.
The State Tax Officer, Taxpayer Services Circle, Thiruvalla, confirmed the demand through an adjudication order dated April 15, 2024. The taxpayer’s first appeal was subsequently rejected by an order dated November 15, 2025, leading to the proceedings before GSTAT.
The central question was whether tax mistakenly paid under CGST and SGST, instead of IGST, could be treated as unpaid or short-paid tax for the purpose of Section 73.
The assessee contended that the apparent IGST shortfall resulted from a clerical error while filing GSTR-3B. The amount intended to discharge IGST liability had instead been paid under the CGST and SGST heads.
The taxpayer submitted that the error had been explained to both the adjudicating authority and the appellate authority with supporting returns. It maintained that the corresponding tax had reached the Government within the relevant period and that the mistake concerned only the head under which payment was recorded.
It further argued that there was no allegation of suppressed turnover, deliberate tax avoidance or retention of the tax amount. According to the taxpayer, requiring another payment without recognising the amount already deposited would impose an avoidable financial burden.
The taxpayer relied on several High Court decisions concerning payments made under incorrect GST heads and the adjustment or appropriation of such amounts.
The department argued that CGST, SGST and IGST are imposed under separate enactments and credited to different Governments. Consequently, a payment under CGST or SGST could not automatically discharge an IGST liability.
It submitted that Section 77 of the CGST and State GST Acts, read with Section 19 of the IGST Act, provided a specific remedy: payment under the correct head followed by a refund claim for the amount wrongly paid, in accordance with Rule 89.
The Revenue also pointed out that the excess CGST and SGST did not fully match the IGST shortfall. According to its reconciliation, the combined excess was ₹5,42,907.92, while the IGST shortfall was ₹5,57,957.03. Even after adjustment, approximately ₹15,049 would remain unpaid.
It additionally argued that the taxpayer had failed to correct its returns within the statutory period and that the mistake came to light only during departmental scrutiny.
Examining the adjudication order, the Tribunal identified a separate defect in the proceedings.
The show caused notice of alleged short payment of IGST based on the return mismatch and the failure to make timely corrections. However, the adjudicating authority rejected the taxpayer’s explanation by referring to Section 16(2)(a), which concerns the documentary conditions for entitlement to input tax credit.
The Tribunal found that Section 16(2)(a) had not been invoked in the show cause notice. The demand had therefore been confirmed on a footing different from the allegations originally communicated to the taxpayer.
It also observed that the adjudicating authority had failed to analyse or answer the taxpayer’s explanation regarding payment under the wrong heads. The Tribunal held that these defects alone rendered the original adjudication order liable to be set aside.
The Tribunal examined the Kerala High Court’s decision in Rejimon Padickapparambil Alex v. Union of India, decided on November 26, 2024.
The first appellate authority had distinguished that judgment on the ground that it concerned input tax credit recorded under incorrect heads, whereas Sunil Steels’ case involved payment of output tax under incorrect heads.
The Tribunal nevertheless found that the principles recognised by the jurisdictional High Court applied to the present dispute. It referred to the High Court’s discussion of adjustment of wrongly recorded GST amounts and its emphasis on fair and timely resolution of procedural tax disputes.
The bench also noted that the reasoning in Rejimon Padickapparambil Alex had been followed in subsequent Kerala High Court decisions. Applying judicial discipline, it held that the excess available under CGST and SGST because of the clerical mistake was eligible to be set off against the IGST shortfall.
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