Re-credit of Input Tax Credit (ITC) cannot be denied due to technical limitations of the GST portal

The Hon’ble Delhi High Court in the case of M/s. Mohan Footcare Pvt. Ltd. Versus Deputy Commissioner of CGST - 2025 (9) TMI 1389 - DELHI HIGH COURTheld that the refund of ITC initially adjusted as erroneous refund must be re-credited to the assessee’s Electronic Credit Ledger, and that technical limitations of the GST portal cannot be used to deny statutory rights to re-credit.​

Facts:

Mohan Footcare Pvt. Ltd. (“the Petitioner”) was engaged in manufacturing operations resulting in an accumulation of ITC under the inverted duty structure. The Petitioner applied in March 2018 for refund of accumulated ITC up to that date.​

Deputy Commissioner of CGST (“the Respondent”) sanctioned the refund via Form GST RFD-06 on September 27, 2018, releasing Rs. 8,88,564 and adjusting Rs. 23,32,278 against an earlier erroneous refund for July 2017–February 2018.​

The Petitioner contended that its repeated requests for re-credit of the adjusted ITC amount through issuance of PMT-03 were denied due to the GST portal not displaying any option for such action where the refund was adjusted against government dues. The Petitioner had also deposited interest required by the Department following demand.​

The Respondent contended that while there was no dispute about entitlement to re-credit, issuance of PMT-03 and actual re-crediting was technically impossible through the portal due to existing software limitations. Consequently, the request for re-credit was rejected on technical grounds.​

The Petitioner’s grievance was that statutory entitlement to re-credit was being held up due to technical issues and not denied by law. The Petitioner approached the Delhi High Court seeking for re-credit of ITC to their Electronic Credit Ledger under the CGST Act, 2017.​

Issue:

Whether the Petitioner can be denied the benefit of re-crediting ITC in its Electronic Credit Ledger on account of a technical limitation in the GST portal?

Held:

The Hon’ble Delhi High Court in M/s. Mohan Footcare Pvt. Ltd. Versus Deputy Commissioner of CGST - 2025 (9) TMI 1389 - DELHI HIGH COURTheld as under:

• Observed that, the Department did not dispute the Petitioner’s entitlement to re-credit of Rs. 23,32,278 and acknowledged repeated attempts made for issuance of PMT-03 to effectuate re-credit were thwarted by technical limitation on the GST portal.​
• Noted that, no functionality exists on the current GST portal for re-credit of amounts adjusted against any demand or erroneous refund recovery, as admitted in the counter affidavit of the Department.​
• Observed that, the refund/credit amount cannot be held back from the Petitioner purely due to technical reasons, given that the substantive right to credit exists under law.​
• Held that, in view of these unusual facts, the credit of Rs. 23,32,278 must be posted to the Petitioner’s Electronic Credit Ledger within four weeks, even if it requires manual intervention on the part of the Department and disposed of writ petition and all pending applications in these terms, directing the Department to ensure compliance by way of manual re-credit where necessary.​

Our Comments:

This judgment notably upholds substantive rights under the CGST Act, 2017 by emphasizing that administrative or technical incapacity cannot be used to defeat a taxpayer’s lawful claim or refund.

Relevant Provision:

Section 49(4) of the CGST Act, 2017:

“49. Payment of tax, interest, penalty and other amounts.-

The amount available in the electronic credit ledger may be used for making any payment towards output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and subject to such conditions and restrictions within such time as may be prescribed.”

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