GR Tech Services Pvt. Ltd. Vs Assistant Commissioner of Commercial Taxes (Audit) (Karnataka High Court)
When the Tax Has Already Reached the Government, Can It Be Demanded Again Merely Because It Was Paid Under the Wrong Head?
The Karnataka High Court, in GR Tech Services Pvt. Ltd. v. Assistant Commissioner, dealt with a recurring issue under the GST regime. The taxpayer had initially discharged IGST, treating the transaction as an inter-State supply. It was subsequently found that the supply was, in fact, intra-State, warranting payment of CGST and SGST. Instead of recognising that the tax had already reached the Government, the Department proceeded under Section 73, demanding CGST and SGST afresh, together with interest and penalty, while directing the taxpayer to separately pursue a refund of the IGST already paid. The High Court set aside the adjudication order and remanded the matter, holding that the authorities had failed to examine the matter in the light of Section 77(2) of the CGST Act read with Rule 92 of the CGST Rules, before fastening such liability.
While the relief granted by the Court is both equitable and commercially sensible, the legal reasoning merits closer reflection.
Section 77(2) is a limited statutory protection it merely declares that where IGST has been paid on a transaction subsequently held to be intra-State, the registered person shall not be liable to pay interest.
