Case Law Details
SYA Homes Vs Assistant Commissioner (ST) (Madras High Court)
Madras HC Directed Appropriation of IGST Paid Under Wrong Head Towards CGST and SGST Liability Instead of Fresh Payment:
The petitioner inadvertently reported and discharged the entire GST liability of Rs.5,84,832.70 for September 2021 under the IGST head while filing GSTR-3B, instead of apportioning Rs.2,92,416.35 each towards CGST and SGST. Consequently, an order dated 17.07.2023 directed the petitioner to pay the outstanding CGST and SGST dues. The petitioner sought rectification. By rectification order dated 17.02.2026, it was held that the petitioner should first pay Rs.2,92,416.35 each towards CGST and SGST and thereafter claim refund of the Rs.5,84,832.70 erroneously paid under the IGST head.
The petitioner challenged the rectification order by filing the present writ petition. The petitioner relied on the findings in the rectification order itself, which recorded that the entire tax liability had already been discharged, though under the wrong tax head, and requested a direction to the GST authorities to transfer the amount from the IGST head to the CGST and SGST heads. Reliance was also placed on the judgment of the Kerala High Court in Saji S, Proprietor, Adithya and Ambadi Traders v. The Commissioner, State GST Department and another, order dated 12.11.2018.
The respondents relied upon Section 19 of the IGST Act read with Rule 89(1A) of the CGST Rules, contending that the proper course was for the petitioner to first discharge the CGST and SGST liabilities and thereafter seek refund of the IGST amount.
The Court examined Section 19 of the IGST Act, noted the corresponding provision in Section 77 of the CGST Act, and referred to Rule 89(1A) framed for implementing those provisions. The Court observed that these provisions apply where a registered person pays integrated tax on a supply treated as an inter-State supply which is subsequently held to be an intra-State supply. The Court held that these provisions do not apply where tax has merely been paid inadvertently under the wrong tax head.
The Court noted that the rectification order itself categorically recorded that the aggregate tax liability of Rs.5,84,832.70 had already been discharged by remittance under the IGST head and that the petitioner was entitled to refund of that amount. The Court held that, since the petitioner had discharged the tax liability within the prescribed period, the petitioner could not be directed to first pay the CGST and SGST dues and thereafter seek refund.
Accordingly, the writ petition was disposed of with directions that the petitioner file an application seeking appropriation of Rs.5,84,832.70 paid under the IGST head towards the CGST and SGST liabilities. If procedurally necessary, the petitioner could submit a refund application. The respondents were directed to appropriate the amount already available towards the CGST and SGST liability within 30 days of receipt of the application. The rectification order dated 17.02.2026 was set aside to the extent it conflicted with these directions. No costs were awarded, and the connected miscellaneous petitions were closed.
Cases Discussed
- Saji S., Proprietor, Adithya and Ambadi Traders v. Commissioner, State GST Department & Anr. (Kerala High Court), W.P.(C) No. 35868 of 2018, order dated 12.11.2018
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
In September 2021, the petitioner filed the GSTR-3B return by inadvertently reflecting the tax liability of Rs.5,84,832.70/- under the IGST head instead of apportioning it as Rs.2,92,416.35/- each towards CGST and SGST. This resulted in order dated 17.07.2023 directing the petitioner to pay the outstanding SGST and CGST dues. The petitioner applied for rectification. By order dated 17.02.2026, it was concluded that the petitioner should first discharge the liability of Rs.2,92,416.35/- each towards CGST and SGST and thereafter claim refund of erroneously paid IGST of Rs.5,84,832.70/-. The present writ petition was filed in the above facts and circumstances.
2. Learned counsel for the petitioner relies upon the findings recorded in the rectification order and contends that the agreed position is that the entire tax liability of Rs.5,84,832.70/- was discharged by the petitioner, albeit by making payment inadvertently under the wrong IGST head. Therefore, he contends that the GST authorities may be directed to transfer the amount from one head to the other.
3. Learned counsel relies upon the judgment of the Kerala High Court in P.(C) No.35868 of 2018, Saji S, Proprietor, Adithya and Ambadi Traders, Convent Road Nellivila P.O., Venganoor, Thiruvananthapuram, Pin 695 523 and anr. Vs. The Commissioner, State GST Department Tax Tower, Killipalam, Karamana P.O., Thiruvananthapuram, Pin 695 002 and anr. order dated 12.11.2018.
4. In response, relying on Section 19 of the IGST Act, r/w. Rule 89 (1A) of the CGST Rules, Mr.R.Sethu Prabakaran, learned counsel appearing for the respondents, contends that there is no infirmity in the rectification order and that the correct procedure is for the petitioner to pay the dues towards CGST and SGST and thereafter seek the refund.
5. Section 19 of the IGST Act is set out below:
Tax wrongly collected and paid to Central Government or State Government
(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.
6. As is evident from the above, the provision applies in a case where a registered person pays integrated tax on a supply considered by him to be an inter-State supply which is subsequently determined to be an intra-State supply. In that circumstance, he is entitled to refund of the integrated tax. Section 77 is the corresponding provision under the CGST Act. Rule 89 (1A) was framed for the implementation thereof. None of these provisions apply to a case where the tax was paid inadvertently under a wrong head.
7. The rectification order records categorically that the aggregate dues of Rs.5,84,832.70/- were discharged by making the remittance under the IGST head. Consequently, it was held that the petitioner is entitled to a refund of this amount.
8. Given that the petitioner has discharged the tax liability within the prescribed period, the petitioner cannot be penalised by being directed to first pay the taxes and thereafter seek the refund. Therefore, this writ petition is disposed of on the following terms:
i. the petitioner shall file an application requesting that the sum of Rs.5,84,832.70/- which was inadvertently remitted under the IGST head, be appropriated towards the liability under CGST and SGST heads;
ii. If procedurally necessary for this purpose, an application for refund may be submitted;
iii. within 30 days from the date of receipt of an application from the petitioner, the respondents are directed to appropriate the amounts already available towards the CGST and SGST liability of the petitioner;
iv. To the extent the rectification order dated 17.02.2026 conflicts with the above directions, such order is set aside.
9. No costs. Consequently, connected miscellaneous petitions are closed.
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