2023 (6) TMI 940 - HC - GST

Landmark GST Tax Credit Dispute Resolved: Petitioner Wins, Respondent Ordered to Return Funds and Rectify Claims Under Section 16

HC ruled in favor of petitioner regarding GST tax credit dispute. Respondent No.1 was directed to return Rs.13,38,544/- within 2 months and allowed to ... Input Tax Credit entitlement and recovery - Payment under protest and restitution where supplier's error causes duplicate tax liability - Liability for a taxpayer not to suffer for mistake committed by supplier in depositing GST against wrong GSTIN - Right to claim refund from revenue and duty of competent authority to decide such claimInput Tax Credit entitlement and recovery - Payment under protest and restitution where supplier's error causes duplicate tax liability - Petitioner entitled to repayment of the GST amount paid under protest which became payable again due to respondent No.1's erroneous deposit against an incorrect GSTIN. - HELD THAT: - The Court found on admitted facts that respondent No.1 deposited the GST against an incorrect GSTIN, which resulted in the auction sale invoice not being reflected in the petitioner's accounts and led to issuance of demand and the petitioner paying the GST (with interest) under protest to avoid cancellation of its GSTIN. The principle that a person should not suffer for the fault of another was applied to hold that the petitioner is entitled to reclaim the amount paid under protest from respondent No.1. The Court noted respondent No.1's admission of the incorrect deposit and the communications requesting rectification and refund, and concluded that restitution ought to be made to the petitioner. [Paras 9, 11]Writ petition allowed and respondent No.1 directed to return the amount of Rs.13,38,544/- to the petitioner within two months.Right to claim refund from revenue and duty of competent authority to decide such claim - Respondent No.1 permitted to submit a claim before the GST department for the amount wrongly paid and the competent authority of respondent No.2 to decide such claim in accordance with law. - HELD THAT: - While directing restitution by respondent No.1 to the petitioner, the Court expressly granted respondent No.1 the liberty to pursue recovery from the GST authorities by submitting a claim, leaving the decision on such claim to the competent authority in accordance with law. This preserves the departmental remedy without disturbing the petitioner's entitlement to immediate restitution from respondent No.1. [Paras 11]Respondent No.1 at liberty to submit a claim before the GST department; competent authority of respondent No.2 to decide it in accordance with law.Final Conclusion: The writ petition is allowed: respondent No.1 is directed to refund the GST amount of Rs.13,38,544/- to the petitioner within two months and to pay costs of Rs.10,000/- to the petitioner; respondent No.1 may pursue a claim before the GST authorities, which shall be decided according to law. Issues involved: The issues involved in the judgment are related to the return of an amount by respondent No.1 to the petitioner, the adjustment of tax paid under the CGST Act, 2016, the input tax credit claimed by the petitioner, the demand notice issued by respondent No.2 for input tax credit recovery, and the discrepancy in GST deposit by respondent No.1.Return of Amount by Respondent No.1: The petitioner sought direction for the return of Rs.13,38,544/- from respondent No.2, as the amount was paid under protest to avoid GSTIN cancellation. The petitioner argued that they should not suffer for respondent No.1's fault of depositing GST in the wrong account. The Court held that the petitioner is entitled to seek the return of the amount from respondent No.1.Adjustment of Tax Paid under CGST Act, 2016: The petitioner claimed an input tax credit of Rs.9,35,486/- against the purchase made from respondent No.1. Section 16 of the CGST Act allows for the adjustment of tax paid at the time of purchase, with only the balance liability of tax to be paid to the Government.Demand Notice for Input Tax Credit Recovery: Respondent No.2 issued a demand notice to the petitioner for input tax credit recovery along with interest under the GST Act, 2017. The petitioner was served with a show-cause notice for wrongly availing input tax credit amounting to Rs.26,70,414/-. The Assistant Commissioner confirmed a demand of Rs.9,34,096/- with interest, while dropping the demand for recovery of Rs.17,38,572/- and imposing a penalty of Rs.10,000/-.Discrepancy in GST Deposit by Respondent No.1: Respondent No.1 inadvertently deposited the GST in the wrong account instead of the petitioner's correct GST account. This led to a show cause notice being issued to the petitioner, who had to repay the GST with interest to avoid GSTIN cancellation. The Court directed respondent No.1 to return the amount to the petitioner and allowed them to submit a claim before the GST department for the amount paid.Separate Judgment by the Judges: The Writ Petition was allowed by the Court, directing respondent No.1 to return the amount to the petitioner within 2 months. Respondent No.1 was given the liberty to submit a claim before the GST department, and the Court imposed a cost of Rs.10,000/- in favor of the petitioner payable by respondent No.1.