Petitioner wins refund of Rs. 53 lakh excess GST payment after correcting reverse charge error in GSTR-3B return

Gujarat HC allowed petition for refund of excess GST payment. Petitioner erroneously clubbed reverse charge liability with output tax liability in January 2023 GSTR-3B return, then rectified error in March 2023 by paying excess amount of Rs. 53,08,494 through electronic cash ledger. Court found petitioner had already paid tax on outward supplies including inward supply liable to reverse charge, making the additional payment excessive. Authority rejected refund without proper reasoning. HC directed refund of Rs. 53,08,494 as petitioner entitled to excess payment recovery under Circular No. 26/2017.

---

---

Issues Involved:

1. Rectification of error in GST returns under Section 39(9) of the GST Act.
2. Entitlement to a refund of excess tax payment due to non-availability of rectification functionality.
3. Validity of the impugned order rejecting the refund claim.
4. Availability of alternative remedy under Section 107 of the GST Act.

Issue-wise Detailed Analysis:

1. Rectification of Error in GST Returns:

The petitioner, a proprietary concern engaged in trading cotton, filed GST returns for January 2023 with an error. The consultant erroneously showed the GST payment on sales instead of bifurcating it between reverse charge liability on purchases from agriculturists and output tax liability. The petitioner realized the mistake in March 2023 but could not rectify the January return due to the lack of a rectification mechanism. Consequently, the petitioner adjusted the reverse charge liability in the March 2023 return, resulting in an excess tax payment of Rs. 53,08,494/-.

2. Entitlement to Refund of Excess Tax Payment:

The petitioner filed a refund application for the excess payment made in March 2023. The respondent issued a deficiency memo, arguing that the March payment could not be considered excess. Despite raising a grievance with the GST helpdesk, the petitioner was informed that rectification in Form GSTR-3B was not possible, and adjustments could only be made in subsequent returns. The petitioner filed another refund application, which was rejected by the respondent, stating no excess payment was made.

3. Validity of the Impugned Order:

The petitioner challenged the order dated 05.12.2023, rejecting the refund claim. The petitioner argued that the respondent did not provide any reason for the rejection and failed to consider the details provided in the refund application. The petitioner relied on Circular No. 26/2017-GST, which allows for a refund if adjustment is not feasible in Form GSTR-3B. The court found that the petitioner had indeed made an excess payment and was entitled to a refund.

4. Availability of Alternative Remedy:

The respondent argued that the petitioner had an alternative remedy under Section 107 of the GST Act by appealing the impugned order. However, the court entertained the petition, noting that the respondent-authority did not provide reasons for rejecting the refund. The court determined that remanding the matter would be futile, as the facts clearly showed the petitioner's entitlement to the refund.

Conclusion:

The court concluded that the petitioner was entitled to a refund of Rs. 53,08,494/- for the excess tax payment made in March 2023. The court directed Respondent No. 3 to process the refund within twelve weeks. The petition was allowed, and the rule was made absolute to the extent of granting the refund.

---