Kalleppuram Metals Vs Union of India (Kerala High Court)
The Kerala High Court ruled that incorrect classification of Input Tax Credit (ITC) under CGST and SGST instead of IGST does not result in revenue loss. The case involved Kalleppuram Metals, a wholesale iron and steel trader, which faced a penalty and interest demand from tax authorities for allegedly availing ITC under the wrong tax head. The Adjudicating Authority confirmed a demand of ₹14.57 lakh along with interest and penalty, citing Section 73(1) of the GST Act. However, the petitioner argued that the mistake was technical and did not lead to any undue benefit, as IGST credit was available. The appellate authority upheld the order, prompting the firm to challenge it in the High Court.
Referring to its earlier decision in Rejimon Padickapparambil Alex v. Union of India, the Court emphasized that the electronic credit ledger functions as a unified pool for IGST, CGST, and SGST, and minor errors in allocation should not be penalized if there is no tax evasion or short payment. The Court set aside the order and directed a fresh reconsideration, reinforcing that procedural lapses in ITC allocation should not lead to harsh penalties unless actual wrongful utilization occurs.
