TaxTMI 
TaxTMI 
Background: The legislature has enacted section 19 of the IGST Act as well as section 77 of the CGST Act after careful thought to simplify the issues and to avoid the avoidable litigation. The intentions of these two sections are only to facilitate the taxpayer when the supply happens to change from interstate to intra-state or vice versa subsequently so as to enable the taxpayer to pay the appropriate taxes without any interest and to seek refund of the incorrect tax. However, there was a misconception in the minds of the GST officials who till now insist taxpayers to pay the tax first under proper head and then seek refund. All refunds sought by the taxpayers were rejected as time barred as by the time the claim is made, it would cross the available time limit of two years.
The case: There are several judgements available from various jurisdictional high courts wherein it was uniformly held that as and when the GST is paid under a wrong head due to inadvertent error, demand should not be raised under section 73 or 74 or 74A as the applicable taxes are already paid and GST Council must devise a suitable mechanism to address these issues by transfer of the GST to appropriate heads by the GST officials at backend. Despite this clear legal position, the GST officials do not listen to High Court orders and pass orders confirming the duplicate demand of GST. This is happening in almost all states without any exception. Tamil Nadu State officer based at Chennai also confirmed such demand which the Madras High Court Examined and made several observations which are discussed below.
The story: One of the taxpayers from the Chennai city has filed the GSTR 3B for the month of September 2021 wherein due to an inadvertent error, a sum of Rs 5,84,832 was paid as IGST as against CGST and SGST of 2,92,416 each. This was detected by the GST officials and demand was raised on 17/07/2023. The taxpayer applied for rectification quoting that this is only an inadvertent error and the GST was paid in full under a wrong head which may be appropriated by the GST officials instead of insisting the taxpayer to make duplicate payment and seek refund. This plea was not entertained by the GST officials and the rectification stood rejected on 17/02/2026. The taxpayer approached the Madras High Court by way of writ.
Findings of the court: The Madras High Court has observed that Section 19 of the IGST act as well as section 77 of the CGST act establishes that these sections are applicable only in cases where supplies made as inter-state or intrastate are taxable subsequently as intrastate or inter-state due to non- clarity of the exact nature of supply. These sections do not apply in cases where taxes are paid under a wrong head due to inadvertent error. The error is definitely inadvertent as no taxpayer would be interested in a dispute with GST officials. The relevant finding of the high court reads as '6. As is evident from the above, the provision applies in a case where a registered person pays integrated tax on a supply considered by him to be an inter-State supply which is subsequently determined to be an intra-State supply. In that circumstance, he is entitled to refund of the integrated tax. Section 77 is the corresponding provision under the CGST Act. Rule 89 (1A) was framed for the implementation thereof. None of these provisions apply to a case where the tax was paid inadvertently under a wrong head.
7. The rectification order records categorically that the aggregate dues of Rs.5,84,832.70/- were discharged by making the remittance under the IGST head. Consequently, it was held that the petitioner is entitled to a refund of this amount'.
The operative portion of the order reads as ' 8
i. the petitioner shall file an application requesting that the sum of Rs.5,84,832.70/- which was inadvertently remitted under the IGST head, be appropriated towards the liability under CGST and SGST heads;
iii. within 30 days from the date of receipt of an application from the petitioner, the respondents are directed to appropriate the amounts already available towards the CGST and SGST liability of the petitioner'.
Observations: The court is categorical that whenever IGST is paid as CGST plus SGST and CGST plus SGST is paid as IGST, there should not be any demand in case full GST is paid under a wrong head. It is worth to note that the Madras High Court has not remanded the matter for reconsideration but directed the taxpayer to make a fresh application for tax adjustments and the GST officer is directed to make necessary appropriation of taxes so as to nullify the demand within 30 days from the receipt of the application.
Conclusion: All taxpayers, tax professionals as well as GST officials may kindly note that this issue of tax head mismatch is no more res integra as the matter was not remanded but the high court has concluded on this matter. Hence, it is expected that from now onwards, there shall not be any orders by GST officials directing taxpayers to make duplicate payment of GST and then seek refund which increases the workload of GST officials as well. Since GSTAT has started hearing at few benches, we may expected endorsement of the views of the Madras High Court in the case of SYA Homes Versus Assistant Commissioner (ST), Vadapalani Assessment Circle, Chennai, The Assistant Commissioner (ST) (FAC), Deputy Commissioner (ST), Commercial Taxes Department, Chennai - 2026 (7) TMI 909 - MADRAS HIGH COURT