Maruthengal Moideen Vs State Tax Officer (Kerala High Court)
Proceedings under Section 73 of the CGST Act for denial of ITC and imposing interest and penalty on availment of Credit under wrong head not maintainable
Summary: The Kerala High Court in Maruthengal Moideen & Ors. v. State Tax Officer & Ors. [W.P.(C) No. 20837 of 2024] addressed the issue of input tax credit (ITC) availed under the wrong tax heads—CGST and SGST instead of IGST. The Court quashed the order issued under Section 73 of the Central Goods and Services Tax Act, 2017, along with the associated penalties and interest, ruling that such an error does not constitute wrongful availment of ITC as per Section 16(2)(c) of the Act. Relying on its earlier judgment in Rejimon Padickapparambil Alex v. Union of India, the Court noted that the electronic credit ledger functions as a unified pool of funds for tax payments, and such technical errors do not lead to revenue loss, thus proceedings under Section 73 were unwarranted. The Court emphasized that as long as sufficient ITC remains in the electronic credit ledger to cover liabilities across all tax heads, the misclassification of ITC does not attract penalties or interest under Section 50(3) of the CGST Act. Additionally, the Court remanded the case for reconsideration in light of this clarification. The ruling aligns with the broader principle that procedural lapses without revenue loss should not lead to punitive action, as clarified in Circular No. 192/04/2023-GST. This decision provides guidance for similar cases involving technical errors in tax compliance.
