Section 73 Cannot Be Invoked for IGST Paid Instead of CGST/SGST: Kerala HC

Ashok Drugs (Wholesale) Vs Deputy State Tax Officer (Kerala High Court)

The Kerala High Court addressed a writ petition filed by Ashok Drugs (Wholesale) challenging an order issued under Section 73 of the GST Act for the assessment year 2017-2018. The order was based on the allegation that the petitioner claimed ineligible input tax credit (ITC) against the CGST/SGST Acts.

The petitioner contended that while supplying data in the GSTR 3B return for January 2018, they inadvertently paid IGST input credit despite having no interstate sales. The core argument was that the wrong application or adjustment of input tax credit under a different head should not be grounds to initiate proceedings under Section 73 of the CGST Act.

The High Court found that the issue was squarely covered in the petitioner’s favor by an earlier Division Bench decision, Rejimon Padikapprambil Alex v. Union of India and Others. That precedent held that Section 73 is attracted only when tax has not been paid, is short paid, erroneously refunded, or where ITC has been wrongfully availed or utilized for any reason. If the case involves the adjustment of input credit in a different head, proceedings under Section 73 are not attracted because no revenue loss is caused.

Following this precedent, the High Court allowed the writ petition and quashed the challenged order (Ext.P1).

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

This writ petition is submitted by the petitioner who is a registered tax payer under the provisions of the CGST/SGST Act. The challenge raised is against Ext.P1 order passed under Section 73 of the GST Act, pertaining to the assessment year 2017-2018 on the ground that the petitioner claimed ineligible input tax credit against CGST/SGST Acts.

2. Case of the petitioner is that, while supplying data in GSTR 3B for January, 2018, the petitioner inadvertently paid IGST input credit, despite the fact that the petitioner was not having any interstate sales. The specific case of the petitioner is that, the wrong application of input tax credit cannot be a ground to initiate proceedings under Section 73 of the CGST Act. Reliance was also placed on the decision rendered by a Division Bench of this Court in Rejimon Padikapprambil Alex v. Union of India and Others [2024 KHC Online 7215], wherein, this Court, after referring to the relevant statutory provisions, held that, the Section 73 can be attracted only when the tax has not been paid or short paid or erroneously refunded or where input tax has been wrongfully availed or utilized for any reason. If it is a case of adjustment of the input credit in a different head, the proceedings under Section 73 would not be attracted as there is no revenue loss caused.

3. After hearing the learned counsel for the petitioner and the learned Government Pleader, I find that the issue raised in this writ petition is squarely covered in favour of the petitioner as per the decision referred to above.

In such circumstances, this writ petition is only to be allowed. Accordingly, it is ordered that, Ext.P1 shall stand quashed in the light of the principles laid down by this Court in Rejimon Padikapprambil Alex (supra).