The Kerala High Court has quashed tax and penalty order for wrongful Integrated Goods and Service Tax (IGST) credit availment.
The bench of Justice Bechu Kurian Thomas has observed that for utilizing the IGST liability, the clarification emphasizes that the eligibility of funds for this payment is based on the total balance in the entire wallet and not just one of the compartments. In short, the analogy of the above Circular was held to be that the GST system treats the electronic ledger as a unified resource and if collectively the available funds fall below the amount of wrongly availing credit during the specified period, interest can be imposed.
The Petitioner/assessee is engaged in the business of providing marketing and financial services and is a registered taxpayer under the GST laws. According to the petitioner, by an inadvertent error, petitioner had claimed input tax credit available under the CGST and SGST as credit under IGST leading to a mismatch between GSTR 3B and GSTR 2A.
Petitioner contends that the inadvertent error while availing ITC under a wrong heading was a human error and since there was no facility for revising the forms, petitioner utilized the IGST credit available.
Subsequently, an order was issued imposing tax and penalty for IGST wrongly availed apart from interest, though there was no revenue loss to the department. Subsequently, a rectification petition was filed which was dismissed by order, by confirming the demands made in the order.
The department pointed out that as there was no inward inter-state supply for the petitioner during the month of October 2017, IGST credit was unavailable in the credit ledger. However, in order to set off the IGST output tax liability, petitioner wrongly availed the CGST and SGST credit, instead of availing it under the respective heads, resulting in wrong availment of IGST, affecting the GST provisions relating to apportionment of tax between Centre and the State.
The petitioner is alleged to have utilized the CGST and SGST credit to set off the IGST output tax liability. Though there is an error in availing the same, it cannot amount to a short availment or short payment. In this context, it needs to be mentioned that in the Circular No.192/04/2023 dated 17.07.2023 issued by the CBIC, the clarification expressly refers to an instance similar to the one on hand and states “Since the amount of input tax credit available in electronic credit ledger, under any of the heads of IGST, CGST or SGST, can be utilized for payment of liability of IGST….”. Hence it cannot be held to be an instance warranting invocation of the proceedings under section 73 of CGST Act.
The Division Bench went on to hold that Section 73 of the Act is attracted only when there is tax not paid or short paid or erroneously refunded or where an input tax has been wrongly availed or utilized for any reason. As far as the grievance and apprehension expressed by the State in that case was concerned that it might be deprived of its legitimate share of the IGST made by supplies outside, the Division Bench made it clear that the State on producing a copy of the judgment with a representation before the GST Council, appropriate directions to solve the issue by taking note of the declaration in the judgment shall be carried out.
The court quashed the order and directed it to pass fresh orders within two months. The court clarified that if in case there is any revenue loss to the Centre in respect of the IGST, it is upon them to take it up with the GST Council with a representation for appropriate relief.
Case Details
Case Title: MJBR MARKETING AND FINANCIAL SERVICES PVT. LTD. Versus UOI
Case No.: WP(C) NO. 26333 OF 2024
Date: 01/04.2025
Counsel For Petitioner: Jazil Dev Ferdinanto, Jose Jacob, Sreelekshmi Ben, Anne Maria Mathew
Counsel For Respondent: Gp Jasmin M.M, Sc.P.R Sreejith
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