2021 (11) TMI 109 - SC - GST

Supreme Court Upholds Circular on GSTR-3B Rectification

The Supreme Court allowed the appeal, setting aside the High Court's judgment and dismissing the writ petition. The Court upheld the validity of the ... Rectification of return - Form GSTR-3B as a return under Section 39 - Section 39(9) rectification mechanism - self-assessment obligation of the registered person - non-operability of statutory forms not excusing self-assessment - no swapping of entries between electronic cash ledger and electronic credit ledger - validity of administrative circular issued to notify Board's decisionValidity of administrative circular issued to notify Board's decision - rectification of return - Whether paragraph 4 of Circular No.26/26/2017 -GST dated 29.12.2017 was without authority of law or contrary to the 2017 Act - HELD THAT: - The Circular was issued to notify decisions of the Board in exercise of powers under Section 168(1) and therefore is not without authority. The stipulations in paragraph 4, which prescribe that adjustments for omissions or incorrect particulars in Form GSTR-3B be made in the return for the month or quarter in which such omissions are noticed (subject to Section 39(9) and applicable rules), are consistent with the scheme of the 2017 Act and the Rules. The Court rejected the contention that the Circular arbitrarily altered the statutory framework and held there was no reason to set it aside. [Paras 31, 37, 50]Circular No.26/26/2017 GST dated 29.12.2017 is not without authority of law and paragraph 4 need not be read down; the Circular is consistent with the 2017 Act and Rules.Form GSTR-3B as a return under Section 39 - Section 39(9) rectification mechanism - Whether a return furnished in Form GSTR-3B can be unilaterally rectified for the same tax period to which the error relates, contrary to Section 39(9) - HELD THAT: - Form GSTR-3B is a return within the meaning of Section 39 and, by amendments to Rule 61(5), remains a prescribed form of return. Section 39(9) provides the statutory mechanism for rectification: omissions or incorrect particulars in a furnished return must be rectified in the return for the month or quarter during which such omission or incorrect particulars are noticed, subject to conditions. Permitting unilateral rectification of a submitted Form GSTR-3B for the earlier period would bypass the express scheme and cause cascading uncertainty in the records of other stakeholders. Consequently, rectification for the period to which the error originally related was not permissible as sought by respondent No.1. [Paras 39, 46, 47, 48]Rectification of a furnished Form GSTR-3B must follow Section 39(9) and cannot be effected by unilateral correction for the earlier tax period to which the error relates.Self-assessment obligation of the registered person - non-operability of statutory forms not excusing self-assessment - Whether non operability of Forms (such as GSTR-2A) at the relevant time absolves the registered person from the statutory obligation of self-assessment and precludes application of Section 39(9) - HELD THAT: - The statutory scheme obliges the registered person to maintain books and records and to self-assess ITC and outward tax liability on the basis of those primary documents. The common electronic portal and auto-population features are facilitatory; their non performance does not excuse the registered person's duty of self-assessment. Therefore, the plea that non operability of GSTR-2A prevented proper self-assessment was rejected as a flimsy excuse and does not negate the applicability of Section 39(9) to returns filed in Form GSTR-3B. [Paras 32, 33, 36, 38]Non operability of statutory forms does not excuse the registered person's obligation of self assessment; Section 39(9) applies despite portal deficiencies.No swapping of entries between electronic cash ledger and electronic credit ledger - rectification of return - Whether a registered person who paid outward tax liability in cash may, by rectifying past Form GSTR-3B, 'swap' entries to utilize earlier available ITC and restore cash ledger entries - HELD THAT: - Payment of outward tax liability by cash or by utilizing ITC is an option exercised by the registered person at the time of filing; the Act and Rules contain no provision permitting retrospective 'swapping' of entries between the electronic cash ledger and the electronic credit ledger. Allowing such unilateral reversal would upset finality and impose cascading effects on suppliers and recipients. The Court held that absent express statutory authority, such swapping cannot be permitted and that postponement (not denial) of availment of ITC under Section 39(9) is the statutory position. [Paras 37, 47, 48]No statutory basis exists to permit retrospective swapping of electronic cash ledger and electronic credit ledger entries; such adjustments must, if at all, follow statutory procedures.Jurisdiction of the High Court - Whether the Delhi High Court lacked territorial jurisdiction or the writ petition was incompetent for non joinder of States/UTs - HELD THAT: - The registered office of the petitioner/respondent No.1 and the office of the authority issuing the impugned Circular were located in Delhi; the challenge was to a central policy decision notified from Delhi. Non impleadment of State Governments/Union Territories was not fatal because the petition did not seek to challenge individual State actions but a central policy. Consequently, the High Court had jurisdiction and the writ was maintainable. [Paras 30]Delhi High Court had territorial jurisdiction and the writ petition was maintainable despite non impleadment of States/UTs.Final Conclusion: The appeal is allowed. The High Court's order reading down paragraph 4 of the impugned Circular and permitting rectification of Form GSTR 3B for July to September 2017 was set aside; the writ petition is dismissed. There shall be no order as to costs. Issues Involved:1. Territorial jurisdiction of the Delhi High Court.2. Non-joinder of necessary parties.3. Validity and authority of the Circular dated 29.12.2017.4. Legal provisions regarding rectification of GSTR-3B returns.5. Impact of technical glitches in the GST portal on the right to rectify returns.6. Compliance with statutory provisions of the CGST Act, 2017 and the rules framed thereunder.Detailed Analysis:1. Territorial Jurisdiction of the Delhi High Court:The appellant argued that the Delhi High Court lacked territorial jurisdiction to entertain the writ petition since the issues pertained to GST, which involves both central and state authorities. The Court rejected this argument, noting that the registered office of respondent No. 1 is in Delhi, and the relief claimed involved central authorities based in Delhi. Therefore, the jurisdiction of the Delhi High Court was upheld.2. Non-joinder of Necessary Parties:The appellant contended that the writ petition suffered from non-joinder of necessary parties, specifically the State Governments/Union Territories. The Court found this argument unpersuasive, stating that the writ petition challenged a central policy decision and not individual actions of states. Thus, non-impleadment of respective States/Union Territories did not affect the maintainability of the writ petition.3. Validity and Authority of the Circular dated 29.12.2017:The impugned Circular was issued by the Commissioner (GST) to clarify various aspects of return filing under GST. The Court held that the Circular was issued under the authority of Section 168(1) of the CGST Act, 2017, and was thus valid. The argument that the Circular was issued without authority of law was rejected.4. Legal Provisions Regarding Rectification of GSTR-3B Returns:The High Court had read down paragraph 4 of the Circular to allow rectification of GSTR-3B returns for the period in which the error occurred. The Supreme Court found this approach flawed, emphasizing that Section 39(9) of the CGST Act explicitly allows rectification only in the return for the month or quarter during which the omission or incorrect particulars are noticed. The Court held that the High Court's interpretation was inconsistent with the statutory provisions.5. Impact of Technical Glitches in the GST Portal:The respondent argued that due to technical glitches in the GST portal, it was unable to access necessary information to correctly file returns. The Supreme Court dismissed this argument, stating that registered persons are legally obligated to maintain books of accounts and records, which serve as the primary source for self-assessment of tax liabilities. The non-operability of Form GSTR-2A was deemed a flimsy excuse.6. Compliance with Statutory Provisions of the CGST Act, 2017 and the Rules Framed Thereunder:The Court emphasized that the CGST Act and the Rules framed thereunder provide a clear mechanism for rectification of returns. The impugned Circular was found to be consistent with these provisions. The Court rejected the High Court's direction to allow rectification of GSTR-3B returns for the period in which the error occurred, holding that such rectification must be done in the return for the month or quarter during which the error is noticed, as per Section 39(9).Conclusion:The Supreme Court allowed the appeal, setting aside the High Court's judgment and dismissing the writ petition filed by respondent No. 1. The Court upheld the validity of the Circular dated 29.12.2017 and affirmed that rectification of GSTR-3B returns must comply with the statutory provisions of the CGST Act, 2017.