Section 77 of CGST Act, 2017 read with Section 19 of IGST Act, 2017 governs the provisions for Tax wrongfully collected and paid to Central Government or State Government.  The same is decided in the case of Shree Nanak Ferro Alloys (P.) Ltd. v. Union of India and details thereof are as follows:-

♦ Facts & Submission by Petitioner The petitioner filed its GSTR-1, showing his total Integrated Tax liability. In GSTR-3B, the liability shown under the IGST was deficient, whereas the CGST shown excess and the tax was also paid accordingly. This remained unnoticed for one year and noticed in course of audit that the petitioner had short paid Integrated Tax and accordingly, the petitioner was asked to make the payment along with the interest. The petitioner submitted that actually the payment of tax was made under the wrong head in CGST, in which there was no liability. The tax was duly paid and it was only a bona fide mistake in the early phase of the GST implementation.

♦ Submission by Other Party The learned counsel for the CGST, has opposed the prayer that GSTR-1 was submitted by the petitioner rightly and petitioner was fully aware of the nature of the supply and accordingly, the GSTR-3B was filed by the petitioner intentionally showing deficit liability of IGST and also wrongly showing CGST liability. He further submitted that there is no provision for transfer / adjustment / utilization of paid tax from one head to the other head and also drawn attention towards Article 269-A of the Constitution of India.

♦ Reference of Law

  • Section 49 (3) and (4) of the CGST Act, 2017

3. The amount available in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount payable under the provisions of this Act or the rules made thereunder in such manner and subject to such conditions and within such time as may be prescribed [under Rule 86 of the CGST Rules, 2017].

4. The amount available in the electronic credit ledger may be used for making any payment towards output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and subject to such conditions and within such time as may be prescribed [under Rule 85 of the CGST Rules, 2017].

  • Section 77 of the CGST Act, 2017

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 [under Rule 89 of the CGST Rules, 2017].

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.

  • Section 19 of the IGST Act, 2017

1. A registered person who has paid integrated tax on a supply considered by him to be an inter-State supply, but which is subsequently held to be an intra-State supply, shall be granted refund of the amount of integrated tax so paid in such manner and subject to such conditions as may be prescribed.

2. A registered person who has paid central tax and State tax or Union territory tax, as the case may be, on a transaction considered by him to be an intra-State supply, but which is subsequently held to be an inter-State supply, shall not be required to pay any interest on the amount of integrated tax payable.

  • Rule 92 (1) of the CGST Rules, 2017 – Where, upon examination of the application of refund of any amount paid as tax other than the refund of tax paid on zero-rated supplies or deemed export, the proper officer is satisfied that a refund under sub-section (5) of section 54 of the Act is due and payable to the applicant, he shall make an order in FORM RFD-06 sanctioning the amount of refund to be paid, in cash, proportionate to the amount debited in cash against the total amount paid for discharging tax liability for the relevant period, mentioning therein the amount adjusted against any outstanding demand under the Act or under any existing law and the balance amount refundable and for the remaining amount which has been debited from the electronic credit ledger for making payment of such tax, the proper officer shall issue FORM GST PMT-03 re-crediting the said amount as Input Tax Credit in electronic credit ledger.

♦ Decision of the Court-

  • We are not entering into the question whether the amount deposited by the petitioner wrongly under the CGST head could be adjusted under the IGST head, as learned counsel for the petitioner has very fairly conceded that the petitioner can deposit the amount of tax within a week and shall either claim the refund of the amount wrongly deposited under the CGST head, or the same may be adjusted against their future liabilities under the CGST head.
  • Section 77(1) of the CGST Act, read with section 19(2) of the IGST Act, clearly lay down that a registered person who has paid the CGST wrongly in place of IGST, is entitled to the refund of the amount of tax so paid u/s 77 (1) of the CGST Act, and at the same time such person cannot be saddled with the liability of interest in view of the provision of section 19 (2) of the IGST Act.
  • The petitioner is directed to deposit IGST and shall not be liable to pay any interest. The petitioner shall also be entitled to get the refund of CGST, or they may get the amount adjusted against their future liabilities, in accordance with law, as they may choose.

Case Law Reference: Shree Nanak Ferro Alloys (P.) Ltd. v. Union of India (HIGH COURT OF JHARKHAND), W.P.(T) NO. 2246 OF 2019, dated DECEMBER 18, 2019. [2020].

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