Delhi HC’s order of allowing rectification of GSTR-3B in case of Bharti Airtel challenged before SC

GST, since its inception, has always served the taxpayers with some hard to digest legal provisions. With too many procedural requirements and technological glitches, common taxpayers have always find it difficult to correct their mistakes which they might have committed inadvertently. Trying to seek way out from one such gaffe, M/s Bharti Airtel, moved Delhi High court for correction of GSTR-3B, which they had mistakenly filed without taking into account exigible ITC for that period, which in-turn could have decreased their tax payment liability to the tune of INR 923cr. A brief analysis of the case is given as under:-

Relevant Legal Provisions

As per sec 39(9) of CGST Act 2017 (as amended by CGST Amendment Act 2018), Subject to the provisions of sections 37 and 38, if any registered person after furnishing a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (4) or sub-section (5) discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars in such form and manner as may be prescribed, subject to payment of interest under this Act.

Provided that no such rectification of any omission or incorrect particulars shall be allowed after the due date for furnishing of return for the month of September or second quarter following, the end of the financial year to which such details pertain, or the actual date of furnishing of relevant annual return, whichever is earlier.

As per para 4 of Circular No. 26/26/2017-GST dated December 29, 2017, It is clarified that as return in FORM GSTR-3B do not contain provisions for reporting of differential figures for past month(s), the said figures may be reported on net basis alongwith the values for current month itself in appropriate tables i.e. Table No. 3.1, 3.2, 4 and 5, as the case may be. It may be noted that while making adjustment in the output tax liability or input tax credit, there can be no negative entries in the FORM GSTR-3B. The amount remaining for adjustment, if any, may be adjusted in the return(s) in FORM GSTR-3B of subsequent month(s) and, in cases where such adjustment is not feasible, refund may be claimed. Where adjustments have been made in FORM GSTR-3B of multiple months, corresponding adjustments in FORM GSTR-1 should also preferably be made in the corresponding months.

Facts of the case

In consideration of the writ petition filed by M/s Bharti Airtel Limited, Delhi High court, considering various representation advanced by petitioner, allowed for rectification of GSTR-3B in the month to which it pertains. Reading down para 4 of Circular No. 26/26/2017-GST dated December 29, 2017, Delhi HC held that the rectification of the return for that very month to which it relates is imperative and any restriction on this rectification is ultra vires the provisions of Central Goods and Services Tax Act, 2017 (CGST Act) and contrary to Articles 14, 19 and 265 of the Constitution of India.

In the aforesaid case, due to non-functionality of form GSTR-2 & GSTR-3, the petitioner was unable to ascertain the correct amount of ITC which was available to him for that tax period of July-17 to September-17 and subsequently this  deficiency in reporting eligible ITC in the form GSTR- 3B by the petitioner has resulted in excess payment in cash to the tune of INR 923 cr. Taking the stated fact into consideration, HC held that revenue, being itself unable to implement the proposed schema of GST return for monthly compliance, cannot bar the petitioner from utilizing ITC which was eligible to him and deprive the rectification/amendment of the returns to reflect ITC pertaining to a tax period to which the return relates to. Opines that, refund of excess cash balance in terms of Section 49 (6) r/w Section 54 “does not effectively redress Petitioner’s grievance” and “the only remedy that can enable the Petitioner to enjoy the benefit of the seamless ITC utilization is by way of rectification of its return.

Now assailing above Delhi HC’s order of allowing assesse to rectify the return and claim refund of excess payment made of INR 923cr. revenue has filed SLP before SC on the below mentioned arguments:-

  • The finding of the Hon’ble High Court that there is no statutory provision permitting rectification of errors only in the return with respect to the month in which such error is noticed and not in the return with respect to the month in which the error relates, overlooks and directly contravenes the express wordings of Section 39(9) of the CGST Act, 2017.
  • The submissions of the Revenue regarding the rationale behind not permitting rectification of the Return for the period to which an error relates, were not considered or addressed by the Hon’ble High Court in the impugned Judgment.

Now it would be compulsive to know what final verdict will be announced by The Honorable Supreme Court in this regard and whether the relief extended to taxpayer by Delhi HC will be held valid or not.

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October 2021