Sunil Steels Vs Commissioner of Keralam State GST (GSTAT Thiruvananthapuram)
Summary: GSTAT Thiruvananthapuram allowed Sunil Steels’ appeal concerning tax mistakenly paid under CGST and SGST instead of IGST. A notice dated 18.12.2023 under Section 73 of the CGST Act alleged short payment based on a comparison of GSTR-1 and GSTR-3B. The demand was confirmed and upheld in first appeal. The appellant maintained that the discrepancy arose from a clerical error and that the corresponding tax had already reached the Government. It cited decisions concerning adjustment of tax paid under incorrect heads. The Revenue argued that the separate statutory tax heads could not be adjusted against one another and that the prescribed remedy required payment under the correct head followed by refund under Section 77 of the CGST/KSGST Act, Section 19 of the IGST Act and Rule 89. It also pointed out that excess CGST and SGST of Rs.5,42,907.92 did not fully cover the IGST shortfall of Rs.5,57,957.03, leaving Rs.15,049 unpaid, and that the appellant had not corrected its returns within the statutory period.
The Tribunal independently found that the adjudication order relied on Section 16(2)(a), although the notice contained no allegation under that provision, and failed to analyse or answer the appellant’s explanation. It held that these defects alone warranted setting aside the original order. On adjustment, it followed Rejimon Padickapparambil Alex v. Union of India and the jurisdictional High Court decisions identified in the order. The Tribunal relied on the principles concerning credit fungibility, including the findings reproduced through Rejimon referring to Saji S. and Circular No.192/04/2023-GST. It held that payment under CGST/SGST instead of IGST did not amount to non-payment or short payment attracting Section 73 and permitted the excess credit arising from the clerical mistake to be set off against the IGST shortfall through the electronic credit ledger. However, the Revenue’s quantified reconciliation had not been disputed or refuted. Accordingly, the appellate order was set aside and the appeal allowed subject to recovery in cash, with applicable interest, of any amount remaining due after adjustment.
Cases Discussed
- SYA Homes v. Assistant Commissioner (ST), W.P. No.23463 of 2026, decided on 07.07.2026 (Madras High Court). Cited by the appellant for adjustment of tax already paid under the wrong head instead of requiring fresh payment followed by refund.
- M/s Ocean E Mart through Authorised Signatory v. State of U.P. & Others, Writ Tax No.1358 of 2025, decided on 01.12.2025 (Allahabad High Court). Cited by the appellant for reconsideration of IGST liability after accounting for tax deposited under CGST and SGST.
- M/s Win Auto Sales v. UOI, 2025:KER:79884, W.P.(C) No.12913 of 2025, decided on 21.10.2025 (Kerala High Court). Listed by the Tribunal among decisions following Rejimon.
- M/s Kaniamparambil Steels v. State Tax Officer, 2025:KER:46446, W.P.(C) No.5975 of 2025, decided on 23.06.2025 (Kerala High Court). Identified by the Tribunal as following the same principle concerning allocation under incorrect GST heads.
- Golden Traders v. Asst State Tax Officer, 2025:KER:39519, W.P.(C) No.14998 of 2025, decided on 05.06.2025 (Kerala High Court). Listed by the Tribunal among decisions following Rejimon.
- M/s S&D Sales & Marketing vs Golden Traders vs Asst State Tax Officer, 2025:KER:25617, W.P.(C) No.8729 of 2025, decided on 25.03.2025 (Kerala High Court). Listed in this form in the supplied order as following Rejimon.
- TRM Associates v. State Tax Officer, 2025:KER:6671, W.P.(C) No.2694 of 2025, decided on 28.01.2025 (Kerala High Court). Listed by the Tribunal among decisions applying the ratio of Rejimon.
- Rejimon Padickapparambil Alex v. Union of India, W.A. No.54 of 2024, decided on 26.11.2024 (Kerala High Court). The Revenue and first appellate authority sought to distinguish this decision as concerning input tax credit. The Tribunal followed its principles on credit fungibility and technical tax-head errors.
- Jayasree Travels and tours Company v. Union of India, W.P.(C) No.27648/2022, order dated 28.11.2022 (Kerala High Court). Cited by the appellant regarding consideration of refund and the possibility of adjustment against the demand.
- Saji S., Proprietor, Adithya and Ambadi Traders & Another v. Commissioner, State GST Department & Another, 2018 (19) GSTL 385 (KER) = 2018-TIOL-2902-HC-KERALA-GST, W.P.(C) No.35868 of 2018, decided on 12.11.2018 (Kerala High Court). Cited by the appellant and referred to in the findings reproduced through Rejimon concerning transfer and adjustment of amounts paid under an incorrect GST head.
FULL TEXT OF THE ORIGINAL GSTAT JUDGMENT/ORDER
The present appeals are directed against the Order-in-Appeal AD 3206 240011202 dated 15/11/2025 passed by the Joint Commissioner (Appeals), CGST, Cochin.(Appellate Authority)
1 Question of Law to be decided
Whether payment of tax under the head CGST / SGST instead of IGST would amount to non-payment / short payment of tax, actionable under section 73 of the KGST Act / CGST Act?
2. Brief Facts of the Case
2.1 The Appellant, M/s Sunil Steels ( GSTIN 32AACFM6140P1Z7) were issued with SCN on 18.12.2023 under section 73 of the CGST Act on the grounds there was a short payment of tax based on the comparison of GSTR 1 and GSTR 3B.
2.2 State Tax Officer, Tax Payer Services Circle, Thiruvalla vide Order No.32AACFM6140P1Z7/2018-19/DRC-07 dated 15.04.2024 confirmed the demand.
2.3 The Appellants appeal against the said adjudication order was rejected by the impugned order of the Appellate Authority.
2.4 Aggrieved by the said order, this appeal has been filed before the Tribunal.
3.0 Submissions of the Appellant :
3.1 The short fall of IGST is only on the reason of a clerical mistake at the time of submitting GSTR3B. The IGST payments were made under CGST/SGST. This fact was properly explained and demonstrated with the support of GST returns before the original authority and appellate authority.
3.2 The same mistake was only noticed when notice (SCN) was served from the department; hence the allegation that error was not corrected in time .
3.3 There was no non-payment of tax in substance. The corresponding tax amount was actually paid to the Government within the relevant period. The error was only with respect to the head under which the tax was remitted.
3.4 There is no allegation that the Appellant has retained the tax amount or that the Government has suffered a loss equivalent to the tax already paid.
3.5 The issue of payment under an incorrect tax head was considered by the Hon’ble Kerala High Court in Saji S., Proprietor, Adithya and Ambadi Traders & Another v. Commissioner, State GST Department & Another, W.P.(C) No. 35868 of 2018, judgment dated 12.11.2018. In that case also, tax which ought to have been paid as IGST was remitted under the SGST head. The Hon’ble Kerala High Court considered Section 77 and the refund provisions and directed the authorities to ensure transfer of the amount from the wrong head to the correct head. The Hon’ble Court observed that it would be inequitable to allow the taxpayer to suffer merely because the amount had been remitted under the wrong head. The ratio of the said judgment is squarely relevant to the present case, particularly because the present proceedings also concern payment of tax under CGST and SGST instead of IGST.
3.6 The same issue has again considered by the honourable Kerala High Court in WP(C) No: 27648/2022 in the case of Jayasree Travels and tours Company Vs Union of India. As per order dated 28.11.2022 disposed the writ petition and directed to consider the refund application and to also to consider the possibility adjust the same against the due as stated in the notice.
3.7 The issue again came before the Hon’ble Allahabad High Court in M/s Ocean E Mart through Authorised Signatory v. State of U.P. & Others, Writ Tax No. 1358 of 2025, decided on 01.12.2025. In that case, the taxpayer contended that IGST had been paid incorrectly under CGST and SGST and that the authorities had nevertheless demanded IGST. The Hon’ble Allahabad High Court, after considering the matter, set aside the impugned orders and directed the authorities to reconsider the matter by taking into account the tax deposited under SGST and CGST towards the IGST liability.
3.8 Hon’ble Madras High Court, in SYA Homes v. Assistant Commissioner (ST), W.P. No. 23463 of 2026, decided on 07.07.2026. The Hon’ble Court held that where the taxpayer had already discharged the tax liability within the prescribed period, the taxpayer could not be penalized by requiring a second payment followed by a refund claim The Court directed the authorities to appropriate the amount already remitted under the wrong head towards the CGST and SGST liability. Though the factual direction in that case operated in the reverse situation, namely IGST paid instead of CGST/SGST, the underlying principle is equally relevant: where the entire tax liability has already been discharged and the mistake is confined to the tax head, the taxpayer should not be subjected to double payment.
3.9 The Appellant further submits that the entire amount of tax corresponding to the disputed transactions has already been deposited with the Government. There is no allegation or finding that the appellant has suppressed the turnover or deliberately avoided payment of tax.
3.10 Shri Sreejith, R Advocate, appeared for the appellant and strongly urged the above submissions.
4.0 Submissions of the Respondent / Revenue.
Shri Mansur M.I. learned AR, made the following submissions on behalf of the revenue:
4.1 CGST, SGST and IGST are levied under separate Acts and credited to different Governments. A payment under CGST or SGST does not discharge a liability under IGST. For a wrong-head payment, the law provides a specific remedy. Under Section 77 of the CGST/KSGST Act and Section 19 of the IGST Act, the taxpayer must pay the tax under the correct head. It may then claim a refund of the amount wrongly paid, under Rule 89 of the Rules. The law does not provide for adjusting one head against another. The appellant has not paid the IGST and has not claimed any refund. Its GSTR-9 shows refund claimed as nil.
4.2 Under Rule 89(1A), the time limit for such a refund runs from the date of payment under the correct head. Once the appellant pays the IGST, it can claim a refund of the excess CGST and SGST.
4.3 The appellant says the excess CGST and SGST exactly match the IGST shortfall. Its own returns (Enclosures 1 and 2) show otherwise: The excess under CGST and SGST together is Rs 5,42,907.92. The IGST shortfall is Rs 5,57,957.03. Even if both excess amounts were set off in full, IGST of Rs 15,049 would remain unpaid. The appellant’s own reconciliation, filed with its reply, shows the same gap. So Grounds C and E are factually incorrect.
4.4 The error was not corrected in time
Sections 37(3) and 39(9) allowed the appellant to correct errors in its returns within the specified period. It made no correction. Part V of its GSTR-9 shows no amendments or additional payments. The mismatch came to light only on scrutiny by the department.
4.5 The judgment relied on does not apply
Rejimon Padickapparambil Alex (W.A. No. 54 of 2024, High Court of Kerala) dealt with input tax credit taken under the wrong head. Credit can be cross-utilised between heads under Section 49(5). The present case is about output tax not paid under the correct head, which is governed by Section 77 CGST and Section 19 IGST. The first appellate authority rightly distinguished the judgment.
5.0 Discussions & Findings
5.1a. On perusal of the SCN we find that there has been a allegation of short payment of IGST of Rs 5,57,957 in GSTR-3B as compared with GSTR-1.
b. The SCN further states that :
Any rectification of error or omission in respect of the details furnished in GSTR-1 is to be made as per section 37(3) within the prescribed time limit. Records indicate that you have not made any amendments in the details furnished during the relevant period within the statutory deadline. Hence, it is evident that you have remitted a short payment of tax in GSTR-3B compared to GSTR-1
c. No violation of any other statutory provisions was alleged against the appellant.
5.2 On perusal of OIO it is seen that the appellant has contended that:
a. they had verified the return and found that during the period by mistake they had paid the said tax relating to IGST under SGST & CGST. The alleged short remittances under IGST were properly satisfied under CGST AND SGST. The excess remittances available under CGST and SGST are Rs: 271454/ under each head. The same excess remittances is relating to the payment of IGST. The change of payment head may not be considered as short remittances to attract assessment.
b. In response to the above contentions, the adjudicating authority has made a finding to the following effect:
I have gone through your explanation. First defect is the excess availment and utilization of IGST for Rs.5,57,957/-. You have agreed the defect and you had verified the return and found that during the period by mistake we had paid the said tax relating to IGST under SGST & CGST . In this case your reply is not acceptable. In accordance with Section 2(62) and Section 16(2)(a) of the KSGST Act read with rule 46 of the KGST Rules this would make revenue loss to the exchequer of the State as well as Centre. Hence the defect No.1 is still exists.
c. Having found that the assesee’s contentions were not acceptable in view of section 16(2)(a), the OIO concludes by repeating the allegations in the SCN:
Any rectification of error or omission in respect of the details furnished in GSTR-1 is to be made as per section 37(3) within the prescribed time limit. Records indicate that you have not made any amendments in the details furnished during the relevant period within the statutory deadline. Hence, it is evident that you have remitted a short payment of tax in GSTR-3B compared to GSTR-1
5.3 We find that Section 16(2) (a) of the KGST / CGST Act reads as follows:
Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,–
he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;
5.4 On perusal of the SCN we find that there is no reference to section 16(2) (a) any where in the SCN. Therefore prima facie we find that while the show cause notice was issued on the grounds that there has been a short payment of tax on account of non filing of a rectification under Rule 37(1) , the oio has confirmed the demand in terms of Section 16(2) (a) which is entirely on a different footing and was not alleged anywhere in the SCN. Besides confirming the demand on grounds not stated in the SCN, the OIO has also not analysed / answered the contentions raised by the appellant and for this reason alone , the OIO is liable to be set aside in its entirety.
5.5 We now proceed to examine the impugned OIA and we find that the operational part reads as follows:
“8)Contention raised regarding to short payment of tax was that the appellant had paid tax relating to IGST under the head CGST & SGST mistakenly. The defect occurred is only a clerical error. The appellant relied on judgment of Hon’ble High Court of Kerala in WA No.54 of 2024 dated 26.11.2024 in Rejimon Padickapparambil Alex case.
9) I have examined the above contention. The relied judgment is not applicable in the case at hand. Where the Hon’ble Court discussed the wrong availment of ITC as CGST & SGST head instead of IGST in the light of Section 49(5) of the GST Act, 2017. In this case tax payer had remitted tax under the wrong head CGST and SGST instead of the IGST head. The tax payer is eligible to refund of the excess amount wrongly paid under the CGST & SGST head. The short payment made under IGST head has to be remitted by the tax payer. So contention advanced has no merit as relied judgment is not applicable in the case at hand and hence contention is rejected.”
5.6 We have perused the above said judgment in the case Rejimon Padickapparambil Alex vs Union of India WA No.54 of 2024 dated 26.11.2024. We find that in that case the honorable High Court has appreciated and approved the following principles with respect to the fungibility of credit between CGST/SGST and IGST as recorded in an order dated 14.12.2023 passed by Assistant Commissioner of Central Tax, East Division-6, Bengaluru:
a. Kerala High Court decision in the case of Saji S. Vs.Commissioner of State GST 2018 (19) GSTL 385 (KER) = 2018-TIOL-2902-HC-KERALA-GST has allowed transfer and adjustment of amount from “SGST” to “IGST” and also held that it is inequitable for authorities to let the assessee suffer on account of any delay in transfer. Therefore, relying on the decision of Kerala High Court (Supra) tax paid wrongly under CGST and SGST should rightly be adjusted and no further recovery under IGST is legally sustainable.
b. CBIC vide Circular No.192/04/2023-GST dated 17th July 2023 had given clarification on charging of interest under section 50(3) of the CGST Act, 2017, in cases of wrong availmentof IGST credit and reversal thereof.
c. The essence of the above clarification is that the input tax credit (ITC) available in the electronic credit ledger should be considered as a pool of funds designated for different types of taxes, such IGST, CGST and SGST. These accounts represent a wallet with compartments for IGST, CGST, and SGST funds. Therefore, while determining interest under rule 88B of the CGST Rules, the entire wallet has to be taken into consideration, not just individual compartments. If the total balance (combining IGST, CGST, and SGST) falls below the amount of the wrongly availed IGST credit, there is interest liability. If, however, the total wallet balance never dips below this specific amount during the relevant period, there’s no interest liability. Similarly, 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, not just the IGST compartment. In short, the analogy of the above circular is that the GST system treats the electronic credit ledger as a unified resource, and interest is incurred if, collectively, the available funds fall below the amount of wrongly availed credit during the specified period.
5.7 The Court went on to add:
“8. We have deemed it appropriate to extract the above findings from the order of the Assistant Commissioner since we find that it not only represents the correct view of the procedural law in this regard, but more importantly, demonstrates that revenue officials, even at the level of Assistant Commissioner, who are often the first point of contact between an assessee and the revenue department, are capable of rendering timely and effective justice in our country which is known for its huge backlog of cases. At a time when the justice dispensation system is looking for ways and means to reduce litigation generally, and especially in the field of taxation where delays can affect the nation’s economy, orders such as the one extracted above come as a welcome breath of fresh air, and are to be duly appreciated and encouraged. It needs no gainsaying that an expeditious disposal of cases, especially those involving procedural aspects of taxation, is the need of the hour so as to ensure fairness and certainty in tax administration.
9. We find that on the facts in the instant case, the notice issued to the appellant, and the demand confirmed against him, were in proceedings initiated under Section 73 of the GST Act. The said 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 3B. The mistake was also insignificant because it is not in dispute that there was no outward supply attracting IGST that was effected by him.”
5.8 We also find that the ratio of the above decision has been followed in the cases listed below:
a. Order dated 28/01/2025 of Kerala High Court in the case of TRM Associates vs State Tax Officer WP( C) NO 2694 of 2025 cited in 2025:KER:6671
b. Order dated 25/03/2025 of Kerala High Court in the case of M/s S&D Sales & Marketing vs Golden Traders vs Asst State Tax Officer WP( C) NO 8729 of 2025 cited in 2025:KER:25617
d. Order dated 23/06/2025 of Kerala High Court in the case of M/s Kaniamparambil Steels vs State Tax Officer WP( C) NO 5975 of 2025 cited in 2025:KER:46446
e. Order dated 21/10/2025 of Kerala High Court in the case of M/s Win Auto Sales vs UOI-WP( C) NO 12913 of 2025 cited in 2025:KER:79884
5.9 We find that the law as laid down by the honorable jurisdictional High Court is applicable mutatis mutandis to the present case and in keeping with the tenets of judicial discipline, we are duty bound to follow the same. We find that the excess credit available in the CGST / SGST account of the appellant (arising out of a clerical mistake wherein instead of paying in IGST account, payment was made in the CGST / SGST account) is eligible to be set off against the shortfall in IGST amount due.
5.10 However we are also aware of the contentions of the learned AR wherein it is stated that :
“The appellant says the excess CGST and SGST exactly match the IGST shortfall. Its own returns (Enclosures 1 and 2) show otherwise: The excess under CGST and SGST together is Rs 5,42,907.92. The IGST shortfall is Rs 5,57,957.03. Even if both excess amounts were set off in full, IGST of Rs 15,049 would remain unpaid. The appellant’s own reconciliation, filed with its reply, shows the same gap. So Grounds C and E are factually incorrect.”
5.11 We find that the above contentions of the learned AR have not been disputed / refuted by the appellant, inspite of ample opportunities available. We therefore find that any amount which is still due to the revenue after set off as per directions in paragraph 4.7 is liable to be recovered along with interest as per applicable legal provisions.
6.0 In view of the above findings and keeping in mind the law as laid won by the honourable high court of Kerala, we answer the question of law in para 1 in the negative and hold that:
Payment of tax under the head CGST / SGST instead of IGST would not amount to non-payment / short payment of tax, and no action would lie under section 73 of the KGST Act / CGST Act.
7.0 In view of the above findings, the following order is passed:
The order in appeal is set aside and the appeal is allowed in the following terms:
a. the excess credit available in the CGST / SGST arising out of appellant’s clerical mistake is allowed to be set off against the shortfall in IGST amount due through the electronic credit ledger.
b. any amount which is still due to the revenue after the set off is liable to be recovered in cash along with interest as per applicable legal provisions.
Order pronounced in open court on 08/10/2026.
