The Kerala High Court has reiterated that the mere utilization of eligible Integrated Goods and Services Tax (IGST) credit under the heads of Central GST (CGST) and State GST (SGST) cannot automatically be treated as wrongful availment of Input Tax Credit (ITC), particularly when there is no loss of revenue to the exchequer.
The bench of Justice Bechu Kurian Thomas declined to exercise writ jurisdiction under Article 226 of the Constitution and noted that the petitioner had already availed the statutory appellate remedy and that the appeal was pending before the competent authority.
The decision came in a writ petition filed by Grand Hyundai challenging an assessment order issued under Section 73 of the Central Goods and Services Tax Act, 2017 and the corresponding State GST Act for the assessment year 2019-20. The tax authorities had alleged that the taxpayer had utilized ITC in excess of what was permissible and consequently raised a tax demand.
The assessment order dated August 9, 2024 concluded that the taxpayer had wrongly utilized Input Tax Credit and imposed liability under the GST law. Aggrieved by the order, the taxpayer filed a statutory appeal before the Joint Commissioner (Appeals) on November 7, 2024.
While the appeal was pending, the taxpayer approached the Kerala High Court seeking intervention. The principal contention was that the alleged excess ITC utilization was merely the result of availing eligible IGST credit under CGST and SGST heads and did not amount to wrongful availment of credit.
The petitioner relied heavily on the High Court’s earlier judgment in Rejimon Padickapparambil Alex v. Union of India and Others, wherein the Court had observed that the electronic credit ledger functions like a wallet containing separate compartments for IGST, CGST and SGST credits. The Court had held that if the credit itself is legally available, utilization under a different tax head would not by itself amount to wrongful availment of ITC.
The taxpayer argued that the facts of the present case were substantially similar to those involved in the earlier judgment and that the assessment order deserved to be set aside for reconsideration.
Reference was also made to another recent decision of the High Court where an assessment order had been quashed despite the pendency of an appeal because the appellate proceedings had remained pending for an extended period.
Based on these precedents, the petitioner sought a similar relief and requested the Court to remand the matter for fresh consideration.
The Court distinguished the earlier case relied upon by the taxpayer by noting that the appellate proceedings in that matter had remained pending for more than eight months, thereby justifying judicial intervention. In contrast, the appeal in the present case had been filed only on November 7, 2024 and was still relatively recent.
The Court observed that the issues raised by the petitioner could effectively be examined by the appellate authority and that no prejudice would be caused to the taxpayer by permitting the statutory process to continue.
Although the Court refused to set aside the assessment order, it acknowledged the taxpayer’s concern regarding potential delay in the disposal of the appeal.
To ensure timely adjudication, the High Court directed the Joint Commissioner (Appeals) to decide the appeal as expeditiously as possible and in any event within four weeks from the date of receipt of the judgment.
Importantly, the Court specifically directed the appellate authority to consider the impact of the judgment in Rejimon Padickapparambil Alex while deciding the appeal.
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