Saji S Vs Commissioner (Kerala High Court)
The petitioner, a registered dealer, purchased goods from Chennai and transported them to Kerala. During transit, the Assistant State Tax Officer (ASTO) detained the goods and issued Ext.P3 notice dated 30.09.2018.
Pursuant to the demand contained in Ext.P3, the consignor paid the tax and penalty, as evidenced by Ext.P4 payment receipt. However, the payment was made under the SGST head instead of IGST. The petitioner, who was the consignee and transporter, contended that the consignor made the payment under SGST based on the ASTO’s directions. Despite payment of the tax and penalty, the authorities refused to release the goods on the ground that the remittance ought to have been made under the IGST head. The petitioner therefore filed the writ petition.
The petitioner relied on Section 77 of the GST Act and Rule 4(1) of the GST Refund Rules, 2017, particularly the proviso to Rule 4(1). It was contended that even if the payment under SGST was treated as a mistake, the statutory provisions empowered the authorities to transfer or adjust the amount from SGST to IGST.
The Government Pleader submitted that the petitioner could instead pay the amount under IGST and thereafter seek a refund of the amount paid under SGST. According to the Government Pleader, adjustment by the authorities would require more than a couple of months.
The High Court noted that the material facts were undisputed. The goods were detained while in transit, and the consignor had paid the tax and penalty, although under the SGST head instead of IGST.
The Court examined Section 77 of the GST Act, which provides for refund where tax is paid under one head on the mistaken understanding that a transaction is intra-State or inter-State. The Court also considered Rule 4(1) of the GST Refund Rules, 2017, including its proviso, which provides that where a refund is completely adjusted against an outstanding demand under the Act or any existing law, an order giving details of the adjustment shall be issued in Part A of Form GST RFD-07.
The Court observed that while Section 77 provides for refund of tax wrongly paid under one head, Rule 4 contemplates adjustment of the refundable amount against an outstanding demand. Accepting the petitioner’s submission, the Court held that the amount remitted under the SGST head could be adjusted or transferred to the IGST head. Although the Government Pleader submitted that such adjustment would take time, the Court held that it would be inequitable to make the petitioner suffer on that account.
Accordingly, the High Court directed the second respondent to release the detained goods along with the vehicle forthwith and thereafter ensure that the tax and penalty already remitted under the SGST head were transferred to the IGST head.
The writ petition was disposed of accordingly.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The petitioner, a registered dealer, purchased certain goods from Chennai. He had them transported to Kerala. When the goods were in transit, the Assistant State Tax Officer (ASTO), for the reasons not germane here, detained the goods and issued the Ext.P3 notice, dated 30.09.2018.
2. Based on the demand in the Ext.P3 notice, the consignor paid the tax and penalty, as is evident from Ext.P4 payment receipt. But the remittance was made under the head ‘SGST’.
3. The petitioner, who is the consignee and transporter, insists that the consignor paid the tax and penalty under that only based on the ASTO’s directions. But the fact remains that the remittance must have been under the head ‘IGST’. So the authorities have refused to release the goods. Aggrieved, the petitioner has filed this writ petition.
4. The petitioner’s counsel has drawn my attention to Section 77 of the GST Act and also Rule 4(1) of the GST Refund Rules, 2017, especially the proviso appended to the Rule. To hammer home his contentions that even if the remittance were to treated as a mistake on the consignor’s part, the statute empowers the authorities to transfer the deposit from one head to another: from SGST to IGST.
5. The Government Pleader, on the other hand, submits that the petitioner could as well pay the amount under ‘IGST’ and then claim a refund from the head ‘SGST’. According to her, if the authorities have to go for an adjustment, it will take more than a couple of months.
6. Heard the learned counsel for the petitioner as also the Government Pleader.
7. I reckon the facts are not in dispute. The petitioner, as a consignee and transporter, purchased goods from the consignor in Chennai. While those goods were in transit, they were detained. Further not in dispute is the fact that the consignor paid the tax and penalty. Either on the ASTO’s advice or on its own, it remitted the amount under the head ‘SGST’, instead of ‘IGST’. In this context, we may refer to Section 77 of the GST Act. And it reads:
Section 77: Tax wrongfully collected and paid to Central Government or State Government:
1. A registered person who has paid the Central tax and State tax or, as the case may be, the central tax and the Union territory tax on a transaction considered by him to be an intra-State supply, but which is subsequently held to be an inter-State supply, shall be refunded the amount of taxes so paid in such manner and subject to such conditions as may be prescribed.
2. A registered person who has paid integrated tax on a transaction considered by him to be an inter-State supply, but which is subsequently held to be an intra-State supply, shall not be required to pay any interest on the amount of central tax and State tax or, as the case may be, the central tax and the Union territory tax payable.”
8. We may as well examine Rule 4(1) of the GST Refund Rules, for much turns upon it. And it reads:
“4. Order sanctioning refund
(1) Where, upon examination of the application, the proper officeris satisfied that a refund under sub-section (5) of section 54 is due and payable to the applicant, he shall make an order in FORM GST RFD-06, sanctioning the amount of refund to which the applicant is entitled, mentioning therein the amount, if any, refunded to him on a provisional basis under sub-section (6) of section 54, amount adjusted against any outstanding demand under the Act or under any existing law and the balance amount refundable:
PROVIDED that in cases where the amount of refund is completely adjusted against any outstanding demand under the Act or under any existing law, an order giving details of the adjustment shall be issued in Part A of FORM GST RFD-07.”
(italics supplied)
9. As seen, Section 77 provides for the refund of the tax paid mistakenly under one head instead of another. But Rule 4 speaks of adjustment. Where the amount of refund is completely adjusted against any outstanding demand under the Act, an order giving details of the adjustment is to be issued in Part A of FORM GST RFD-07. The petitioner’s counsel lays stress on this process of adjustment and asserts that the amount remitted under one head can be adjusted under another head, for the demand can be any amount under the Act.
10. Under these circumstances, I find no difficulty for the respondent officials to allow the petitioner’s request and get the amount transferred from the head ‘SGST’ to ‘IGST’. It may, as the Government Pleader has contended, take some time, but it is inequitable for the authorities to let the petitioner suffer on that count.
11. So I hold that the 2nd respondent will release the goods forthwith along with the vehicle and, then, ensure that the tax and penalty already stood remitted under the !SGST! is transferred to the head
!IGST!.
The writ petition is disposed of accordingly.
