IGST Credit Availed as CGST/SGST Due to Technical Error – No Excess ITC and No Section 73 Proceedings Sustainable- Held Kerala High Court
IGST Credit Availed as CGST/SGST Due to Technical Error – No Excess ITC and No Section 73 Proceedings Sustainable- Held Kerala High Court
Date and Year of Judgment
26 November 2024
The Kerala High Court held that mere technical reflection of IGST credit under wrong heads (CGST/SGST instead of IGST) does not amount to wrongful availment of ITC when there is no revenue loss and the credit itself is otherwise eligible.
The judgment adopts a highly practical and substance-oriented interpretation of GST credit provisions and strongly discourages hyper-technical litigation.
Full Case Citation
Rejimon Padickapparambil Alex v. Union of India & Ors.
Writ Appeal No. 54 of 2024
Neutral Citation: 2024:KER:88762
High Court of Kerala at Ernakulam
Bench:Justice Dr. A.K. Jayasankaran NambiarJustice K.V. Jayakumar
1. Main Issue Involved
Whether proceedings under Section 73 can be initiated where:
Assessee was otherwise eligible for IGST credit, but
Due to inadvertent error:
IGST credit was reflected as CGST and SGST credit in GSTR-3B instead of IGST, and
There was no excess availment of ITC or revenue loss.
The core issue is whether a procedural/technical classification mistake in reporting ITC amounts to “wrong availment” under Section 73.
2. Sections and Rules Discussed
Section 73 CGST Act – Wrong availment/utilisation of ITC
The Court harmonized the utilisation mechanism under Section 49 with the broader principle of revenue neutrality and substantive entitlement to ITC.
3. Facts of the Case
The appellant was a registered dealer engaged in business under the name “Padiken Silks”. During FY 2017-18, the appellant received interstate inward supplies on which IGST had been charged by suppliers.
Under the GST return mechanism prevailing at the time:
IGST credit appearing in GSTR-2A had to be:
first reflected as IGST credit in GSTR-3B, and
thereafter utilised for payment of CGST/SGST liabilities.
However, the appellant inadvertently:
showed IGST component as “nil” in eligible IGST credit column in GSTR-3B, and
directly bifurcated the IGST amount into CGST and SGST credit columns.
This resulted in mismatch between GSTR-2A and GSTR-3B.
The department treated this as:
wrongful availment/utilisation of unavailable credit, and
initiated proceedings under Section 73.
Demand order was passed against the appellant.
There was no dispute regarding:
genuineness of purchases,
eligibility of credit, or
payment of tax by suppliers.
The dispute was purely about wrong reflection under credit heads.
4. Appellant’s Submissions
The appellant contended that:
There was no excess availment of ITC.
IGST credit was fully available and eligible.
The only mistake was technical:
IGST was reflected as CGST/SGST.
There was no revenue loss to Government.
Section 73 proceedings are not maintainable for such procedural error.
The appellant also relied upon:
refund adjustment principles, and
revenue neutrality concept.
The appellant argued that substantive credit entitlement cannot be denied for mere accounting/classification mistake.
5. Department’s Submissions
The department argued that:
GSTR-3B did not correctly reflect IGST credit.
Assessee utilised CGST/SGST credit that was allegedly “unavailable”.
Therefore proceedings under Section 73 were justified.
The department treated the issue as wrongful availment solely because of incorrect reporting format.
6. Analysis and Findings of the Court
The Court undertook a detailed analysis of the GST credit mechanism.
The Court noted that:
It was undisputed that:
IGST had actually been paid by suppliers,
corresponding credit existed in GSTR-2A,
assessee was otherwise eligible for the credit.
The Court reproduced in detail an adjudication order passed by an Assistant Commissioner, Bengaluru, dealing with an identical issue.
The Court approved the reasoning in that order, particularly the interpretation of Section 49(5).
(i) Electronic Credit Ledger Is a Common Pool
The Court accepted the reasoning that:
GST electronic credit ledger operates like a “wallet with compartments”.
IGST, CGST and SGST credits together constitute a common pool for utilisation purposes.
Therefore:
Wrong reflection of eligible IGST credit under CGST/SGST heads does not automatically result in wrongful availment.
(ii) No Revenue Loss
The Court emphasized:
There was no revenue loss either to:
Centre, or
State Government.
The credit was otherwise fully available and legally utilisable.
(iii) Mere Technical Mistake
The Court held that:
Assessee merely committed an inadvertent procedural mistake in reporting.
Such technical lapse cannot attract Section 73 proceedings.
(iv) Substance Over Form
The Court strongly emphasized substantive justice over technical compliance.
It appreciated the practical approach adopted by the Bengaluru Assistant Commissioner and observed that such pragmatic adjudication reduces unnecessary tax litigation.
The judgment is a strong endorsement of:
revenue neutrality,
substantive ITC entitlement,
practical tax administration.
Important Observations of the Court
No Wrongful Availment of Credit
The Court held:
“The case before us clearly reveals that there has been no wrong availment of credit…”
Mistake Was Purely Technical
The Court observed:
“…the only mistake committed by the appellant was an inadvertent and technical one, where he had omitted to mention the IGST figures separately in Form GSTR 3B.”
No Section 73 Proceedings Maintainable
The Court categorically held:
“…the appellant shall not be seen as having availed excess credit for the purposes of initiating proceedings under Section 73 of the GST Act.”
Revenue Neutrality Important
The approved adjudication order noted:
“In the instant case, there is no loss of revenue, either to the Centre or to any State…”
Electronic Credit Ledger Functions as Unified Resource
The adjudication order observed:
“The GST system treats the electronic credit ledger as a unified resource…”
These observations significantly strengthen the argument that:procedural errors in credit reflection do not automatically lead to wrongful availment.
7. Judgment of the Court
The Kerala High Court held that:
Proceedings under Section 73 were unsustainable.
There was no excess or wrongful availment of ITC.
The impugned order was quashed.
The appellant cannot be treated as having wrongly availed credit merely due to incorrect disclosure under heads in GSTR-3B.
The Court protected the assessee from substantial tax demand arising solely from technical return filing error.
8. Similar / Related Judgments
Saji S. v. Commissioner of State GST – Kerala HC
Bharti Airtel Ltd. v. Union of India – Supreme Court
AAP & Co. Chartered Accountants – Gujarat HC
Courts increasingly recognize that GST return mechanism and technical reporting issues should not defeat substantive tax rights.
9. CA BTA Insights
This judgment is extremely important for GST litigation involving: