Case Law Details
Orient Traders Vs Deputy Commissioner of Commercial Taxes (Karnataka High Court)
The Hon’ble Karnataka High Court in M/s. Orient Traders v. the Deputy Commissioner of Commercial Taxes (Audit) [Writ Petition No. 2911 of 2022 (T-RES) dated December 16, 2022] has permitted the assessee to make the necessary changes to its Form GSTR 3B returns for the months of July, 2017 and March, 2018 and held that, allowing the assessee to make such changes, would not cause any prejudice to the Revenue Department nor would it upset the chain of credit under the Goods and Services Tax (“GST”) scheme. Further held that, the authorities must avoid a blinkered view while adjudicating/assessing the tax liability of a dealer under the Central Goods and Services Tax Act, 2017 (“the CGST Act”).
Facts:
M/s Orient Traders (“the Petitioner”) is engaged in the supply of machinery, mechanical appliances, parts and its erection, commissioning and installation.
The Petitioner submitted its GST Returns in Form GSTR-3B for the Financial Year 2017-18. The Revenue Department (“the Respondent”) issued a notice to the Petitioner on January 20, 2021 calling for books of accounts in order to conduct a Desk Audit and thereafter, an Audit Enquiry was issued on July 12, 2021 under Section 65(6) of the CGST Act read with Rule 101(4) of the Central Goods and Services Rules, 2017 (“the CGST Rules”).
While reviewing the returns, the Petitioner noticed that certain inadvertent errors and mistakes were made while filing its returns, wherein, the Petitioner had claimed the Input Tax Credit (“ITC”) under wrong column, and due to oversight and inadvertence the Petitioner had considered the import Integrated Goods and Services Tax (“IGST”) pertaining to July 2017 as local IGST and import IGST pertaining to March 2018 as local Central Goods and Services Tax (“CGST”) and State Goods and Services Tax (“SGST”). This error resulted in a mismatch between the Form GSTR-3B and Form GSTR-2A due to which the Respondent stated that the ITC which had accrued to the Petitioner was liable to be disallowed.
The Petitioner had sought permission to rectify these errors by submitting a revised input table on July 29, 2021 but the same was rejected by the Respondent. Thereafter, a Show Cause Notice was issued on January 17, 2022 (“the Impugned SCN”) by the Respondent under Section 73(1) of the CGST Act, proposing to disallow the ITC due to such errors.
Being aggrieved, this petition has been filed.
Issue:
Whether the Petitioner can be allowed to rectify its GST returns filed for the months of July, 2017 and March, 2018?
Held:
The Hon’ble Karnataka High Court in Writ Petition No. 2911 of 2022 (T-RES) held as under:
- Stated that, the introduction of GST required a major overhaul of the indirect tax regime, including the number and formats of statutory returns that were to be filed and that it was expected that dealers across the country would take a reasonable amount of time to readjust to the new system.
- Noted that, the Petitioner entered certain figures in the wrong column of its Form GSTR-3B returns for the months of July 2017 and March 2018 i.e. during the very first Financial Year after the introduction of GST.
- Observed that, the ITC which is admittedly available to the Petitioner has been entered under the wrong column due to errors which are entirely bona fide and inadvertent therefore, a lenient view is required to be taken, particularly since the tax periods involved relate to the very first year of the GST regime.
- Opined that, the authorities must avoid a blinkered view while adjudicating/assessing the tax liability of a dealer under the CGST Act.
- Further noted that, the Respondent were aware of the actual figures and error committed by the Petitioner, but has chosen to selectively ignore the IGST import amounts reflected in the ICEGATE portal of the Customs Department for all the months, except those in which the errors have been committed.
- Held that, the Petitioner is entitled for the limited relief of being permitted to make the necessary changes to its Form GSTR-3B return for the months of July 2017 and March 2018, particularly, since doing so would not cause any prejudice to the Respondent nor would it upset the chain of credit under the GST scheme.
- Set aside the the Impugned SCN.
- Directed the Respondent, to permit the Petitioner to carry out the corrections online by reopening the portal for a limited period.
Relevant Provisions:
Section 65 of the CGST Act:
“Audit by tax authorities.
(1) The Commissioner or any officer authorised by him, by way of a general or a specific order, may undertake audit of any registered person for such period, at such frequency and in such manner as may be prescribed.
(2) The officers referred to in sub-section (1) may conduct audit at the place of business of the registered person or in their office.
(3) The registered person shall be informed by way of a notice not less than fifteen working days prior to the conduct of audit in such manner as may be prescribed.
(4) The audit under sub-section (1) shall be completed within a period of three months from the date of commencement of the audit:
Provided that where the Commissioner is satisfied that audit in respect of such registered person cannot be completed within three months, he may, for the reasons to be recorded in writing, extend the period by a further period not exceeding six months.
Explanation.––For the purposes of this sub-section, the expression “commencement of audit” shall mean the date on which the records and other documents, called for by the tax authorities, are made available by the registered person or the actual institution of audit at the place of business, whichever is later.
(5) During the course of audit, the authorised officer may require the registered person,-
(i) to afford him the necessary facility to verify the books of account or other documents as he may require;
(ii) to furnish such information as he may require and render assistance for timely completion of the audit.
(6) On conclusion of audit, the proper officer shall, within thirty days, inform the registered person, whose records are audited, about the findings, his rights and obligations and the reasons for such findings.
(7) Where the audit conducted under sub-section (1) results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilised, the proper officer may initiate action under section 73 or section 74.”
Section 73 of the CGST Act:
“Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful-misstatement or suppression of facts-
(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder.
(2) The proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order.
(3) Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under sub-section (1), on the person chargeable with tax.
(4) The service of such statement shall be deemed to be service of notice on such person under sub-section (1), subject to the condition that the grounds relied upon for such tax periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice.
(5) The person chargeable with tax may, before service of notice under sub-section (1) or, as the case may be, the statement under sub-section (3), pay the amount of tax along with interest payable thereon under section 50 on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.
(6) The proper officer, on receipt of such information, shall not serve any notice under sub-section (1) or, as the case may be, the statement under sub-section (3), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder.
(7) Where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable.
(8) Where any person chargeable with tax under sub-section (1) or sub-section (3) pays the said tax along with interest payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded.
(9) The proper officer shall, after considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty equivalent to ten per cent. of tax or ten thousand rupees, whichever is higher, due from such person and issue an order.
(10) The proper officer shall issue the order under sub-section (9) within three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund.
(11) Notwithstanding anything contained in sub-section (6) or sub-section (8), penalty under sub-section (9) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax.”
Rule 101 of the CGST Rules:
“Audit-
(1) The period of audit to be conducted under sub-section (1) of section 65 shall be a financial year or part thereof or multiples thereof.
(2) Where it is decided to undertake the audit of a registered person in accordance with the provisions of section 65, the proper officer shall issue a notice in FORM GST ADT-01 in accordance with the provisions of sub-section (3) of the said section.
(3) The proper officer authorised to conduct audit of the records and the books of account of the registered person shall, with the assistance of the team of officers and officials accompanying him, verify the documents on the basis of which the books of account are maintained and the returns and statements furnished under the provisions of the Act and the rules made thereunder, the correctness of the turnover, exemptions and deductions claimed, the rate of tax applied in respect of the supply of goods or services or both, the input tax credit availed and utilised, refund claimed, and other relevant issues and record the observations in his audit notes.
(4) The proper officer may inform the registered person of the discrepancies noticed, if any, as observed in the audit and the said person may file his reply and the proper officer shall finalise the findings of the audit after due consideration of the reply furnished.
(5) On conclusion of the audit, the proper officer shall inform the findings of audit to the registered person in accordance with the provisions of sub-section (6) of section 65 in FORM GST ADT-02.”
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
In this petition, petitioner has sought for the following reliefs:-
i) Issue a Writ of Mandamus, directing the Respondent No.1 to allow the Petitioner to rectify the GST returns filed for the months of July, 2017 and March, 2018;
ii) Consequently, Issue a Writ of Certiorari, quashing the Audit Report dated: 27.08.202 1 bearing reference No. 3207/27.08.202 1 issued by the 1st Respondent; (Annexure-C) and
iii) Pass such other order/Writ/Direction/s as this Hon’ble Court deems fit to grant under the facts and circumstances of this case, in the interest of justice and equity.”
2. The material on record discloses that the petitioner is engaged in the supply of machinery, mechanical appliances, parts etc., as well their erection, commissioning and installation. The petitioner had duly submitted its GST Returns in Form GSTR 3-B for the Financial Year 2017-18 (for short, “the FY”). On 20.01.2021, the 1st respondent issued a notice to the petitioner calling for books of accounts in order to conduct a Desk Audit and directed the petitioner’s attendance on 12.02.2021. In response to the said notice, the duly authorised representative of the petitioner, appeared before the 1st respondent on various dates and produced the books of accounts and records for verification. Thereafter, the 1st respondent issued an Audit Enquiry dated 12.07.2021 under Section 65(6) of the Karnataka Goods and Services Tax Act, 2017 (for short, the “KGST Act”) read with Rule 101(4) of the Karnataka Goods and Services Rules, 2017, calling upon the petitioner to file its response within seven days.
2.1 he petitioner duly filed its response to the observations made in the audit enquiry. In doing so and while reviewing the returns that it had filed, the petitioner noticed that certain inadvertent errors and mistakes were made while filing its returns for the FY 2017-18. More specifically, the petitioner noticed that it had claimed Input Tax Credit (for short “ITC”) relating to imports under Integrated Goods and Services Tax, (for short “IGST’) in July 2017 and March 2018 due to oversight and inadvertence in Column No. 4A(5) instead of claiming it under Column No. 4A(1). The error committed by the petitioner meant that it had inadvertently considered import IGST pertaining to July 2017 as local IGST and import IGST pertaining to March 2018 as local CGST and SGST. This error in entering the figures in the wrong column resulted in a mismatch between the GSTR-3B and GSTR2A forms, due to which, the 1st respondent-DCCT observed in its audit report that the ITC which had accrued to the Petitioner was liable to be disallowed.
2.2 In its reply dated 29.07.2021, the petitioner had sought permission to rectify these errors by submitting a revised input table but the same was rejected by the 1st respondent-DCCT. Based on the audit report dated 27.08.2021, the show cause notice dated 17.01.2022 was issued under Section 73(1) of the KGST and CGST Acts, inter alia, proposing to disallow the ITC pertaining to the above mentioned errors committed by the petitioner, aggrieved by which, the petitioner is before this Court by way of the present petition.
3. Heard learned Senior counsel appearing for the petitioner and learned AGA for the respondents – State.
4. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned Senior counsel for the petitioner submitted that the errors that were committed in filing of the Returns occurred during the nascent stages of the Goods and Services Tax regime, which was brought into force with effect from 01 .07.2017 and that there was a quantum change in the indirect tax regime, which required the filing of number of Returns in new and different formats and that, accordingly, minor and inadvertent errors, such as those committed by the petitioner were entirely bona-fide and in such circumstances, a lenient view is warranted, particularly since rectification of errors at this stage will not cause any loss of revenue nor will there be any cascading effect that will upset the scheme of GST.
4.1 Learned Senior Counsel also submits that for the FY 201 7-18 furnishing of returns through Form GSTR3B was only a stop-gap measure until the Government operationalized the statutory returns under Forms GSTR 2, 2A and 3 as prescribed under the GST Act and that the auto fill facility/auto-setter mechanism that auto populates details into Form GSTR 3B and GSTR 2B was only made available from 04.09.2020 and prior to that, dealers had to manually enter the GST payable into the GST Portal, which was ridden with technical and electronic glitches.
4.2 Lastly, he submits that the details of the IGST relating to imports are readily available on the ICE-GATE portal maintained by the Customs Department, Government of India and that the authorities have, in fact, referred to the same in the absence of GSTR 2-A for all the months except July 2017 and March 2018 i.e., the months in which the errors have been committed. It is submitted that while adjudicating upon the liability of the petitioner, the Revenue is required to look beyond the Returns filed and take a more holistic view having regard to the books of accounts, other statutory forms such as ICE-GATE, etc. He submits that if the authorities were to do the same, it would be clearly apparent that petitioner has only committed a bona fide error and that, in fact, it is eligible to claim the disputed amount of ITC.
5. Per contra, learned AGA for the respondents in addition to reiterating the various contentions urged in the statement of objections submit that the petitioner cannot now, at this belated stage, be permitted to rectify the errors that it has made in view of Section 39(9) of the CGST / KGST Act. He also places reliance on a recent judgment of the Hon’ble Apex Court in the case of Union of India v. Bharti Airtel Ltd.,& others – (2021) 13 SCALE 301, wherein the Apex Court has rejected the plea of the assessee therein to revise its returns beyond the statutory period prescribed under Section 39(9) of the Act. Further, he contends, that no mechanism exists to enable the petitioner to correct its returns at such a belated stage and as such, the petition is liable to be dismissed.
6. I have given my anxious consideration to the rival submissions and perused the material on record.
7. There can be no dispute regarding the fact that the introduction of GST required a major overhaul of the indirect tax regime, including the number and formats of statutory returns that were to be filed and that it was expected that dealers across the country would take a reasonable amount of time to readjust to the new system. In the instant case, the petitioner appears to have entered certain figures in the wrong column of his GSTR 3-B returns for the months of July 2017 and March 2018 i.e,, during the very first financial year after the introduction of GST. The copies of the returns submitted / filed by the petitioner clearly demonstrate and evidence the innocuousness of the errors committed by the petitioner.
8. A perusal of the same makes it apparent that ITC, which is admittedly available to the petitioner has been entered under the wrong column; the material on record also discloses that the said errors are entirely bona fide and inadvertent and that a lenient view is required to be taken, particularly since the tax periods involved relate to the very first year of the GST regime.
9. It is relevant to state that the judgment of the Apex Court in Bharti Airtel’s case (supra) cannot be made applicable to the facts of the case. In the said case, the Apex Court observed that allowing the assessee therein to revise its returns at a belated stage would lead to a cascading effect on the chain of dealers under GST. It was also observed that there is no revenue loss to the assessee and that denial of permission to revise its returns would only result in a delay in availing ITC. However, the facts of the present case are entirely different; in fact, there cannot be said to be any cascading effect since the petitioner only seeks to shift the ITC already claimed from one head to another, which is not disputed by the respondents.
10. Further, in the impugned show cause notice, the Revenue has proposed to deny the ITC claimed by the petitioner, which will undoubtedly lead to a serious revenue loss, unlike in the case of Bharti Airtel, where ITC availment was merely postponed as a result of the It is therefore clear that no reliance can be placed upon the said judgment by the respondents as sought to be contended by them.
11. As rightly contended by the learned Senior Counsel for the petitioner, the authorities must avoid a blinkered view while adjudicating/assessing the tax liability of a dealer under the Act. In the instant case, the respondents have, in the absence of a prescribed GSTR 2- A for the relevant tax periods referred to the IGST import figures reflected in the ICE GATE portal of the Customs Department for all the months except those in which the errors have been committed. This clearly indicates that the respondents are aware of the actual figures and also that there is an error committed by the petitioner, but has chosen to selectively ignore the IGST import amounts reflected in the ICE GATE portal for the tax periods in dispute, which is yet another circumstance to uphold the claim of the petitioner.
12. In view of the aforesaid facts and circumstances, I am of the considered opinion that the petitioner is entitled for the limited relief of being permitted to make the necessary changes to its GSTR 3-B returns for the months of July 2017 and March 2018, particularly, since doing so would not cause any prejudice to the respondents-Revenue nor would it upset the chain of credit under the GST scheme and liberty is to be reserved in favour of the revenue to proceed with the impugned show cause notice dated 17.01.2022 after permitting the petitioner to make the necessary amendments to its GSTR 3-B Returns for the above tax periods.
13. In the result, I pass the following:-
ORDER
(i) The petition is hereby partly allowed.
(ii) The respondents are hereby directed to permit the petitioner to make necessary corrections to the GSTR-3B for the months of July-2017 to March-2018.
(iii) he respondents are further directed to permit the petitioner to carry out the said corrections online by reopening the portal for a limited period to be notified to the
(iv) Due to technical glitches/defects, if it is not possible for the respondents to permit such corrections online or on the portal, respondents are hereby directed to permit to carry out such corrections via manually/physically.
(v) Till the respondents comply with the directions issued above, they shall not take precipitative steps pursuant to the show-cause notice dated 17.01.2022.
(vi) It is made clear that the above order is in the peculiar facts and circumstances of the case, particularly since the tax periods involved relate to the first year of introduction of GST and this order shall not be treated as a precedent nor have any precedential value for any purpose whatsoever.
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