IGST - Place of supply in DRC - Jurisdiction under 73

[Padmanathan KV]

Proceedings under section 73 was initiated against a person registered in the State of Kerala for reversing ineligible IGST credit. The registered person has already reversed the said credit vide DRC-03 along with interest before SCN. So the said payment was submitted in the reply to SCN. However, now the order has been passed wherein the payment is not allowed as Place of Supply selected in DRC-03 is 'Haryana' and not 'Kerala'.

1. Whether the officer has jurisdiction itself to issue SCN under 73 r.w.s 20 of IGST Act, considering the IGST credit is already reversed? or to put it differently, whether wrong selection of POS be treated as non-payment of IGST?
2. Section 77/19 provides for CGST/SGST to IGST and vice versa. However, no mechanism prescribed to change PoS in DRC-03. So whether refund to be applied and payment to be made again? if so whether interest and penalty to be paid?

[KASTURI SETHI]

Sh. Padmanathan Kollengode Ji,

The query-wise my views are detailed below :-

Reply to query no. 1 : Wrong selection of POS cannot be treated as non-payment of IGST. IGST already stands transferred to the Central Govt. Account. The judgement of Calcutta High Court dated 30.4.24 in the case of Cosyn Ltd. - 2024 (5) TMI 316 - CALCUTTA HIGH COURT can be useful in this context.

Reply to query no. 2 : No need of applying for refund claim and making payment again.

Go through Rajasthan High Court Order dated 10.05.24 in the case of K.R. Engineering Works Vs. U.O.I. - 2024 (6) TMI 114 - RAJASTHAN HIGH COURT Emphasis is on human error. This case law can be helpful.

[Sadanand Bulbule]

Dear Sir

I fully endorse the views of Sh. Sethi Sir. Looking at the thought process of the subject officer, it seems  he is obsessed for encashment of too technical errors, if any. This is highly unacceptable despite GST regime being seven years old. When the authorities would learn lessons? God alone knows!

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, Your spontaneous thoughts reminisce me of the poem, 'The Waste Land' written by T.S. Eliot in October, 1922 (applicable even today) . The poet says this world is called the waste land because it is devoid of moral values. Now moral values are at its lowest ebb. So we should not expect altruistic persons in this materialistic world. We are to live in this world which consists of 'composite supply' and NOT of 'mixed supply'. We have Hobson's choice. What is not in our control, we should leave it to God, at least for the purpose of peace of mind.

I am highly grateful to you for expressing your views on my reply to the query. You have devoted your precious time for me.

Warm regards from the core of my heart.

[Sadanand Bulbule]

Dear Sir

With the flooding of appeal petitions,many States are creating additional Appellate Authorities to dispose off petitions speedily to the possible extent to push the appellants to knock the doors of the GSTAT [likely to function shortly]. But the remedy is not that. In realty the administration should find out the real cause for such sea of appeal petitions being filed since January 2024. In my experience, it is none other than creating untenable demand, come what may, to please the higher-ups. 

The authorities have to be honest with themselves clearly, precisely and openly and that's the hardest form of honesty. Such honesty is the rare, the most difficult and the exceptional.

The disease of untenable orders is running faster than plague resulting in the honest taxpayers to be the  "sacrificial goats". Law makers never dreamt of this horror. That's why in my earlier posting, I  requested the authorities to learn right lessons from seven years of bitter experience to stop passing untenable orders. Its not too late.

Let the CBIC open its eyes on this and correct the present system.

[Shilpi Jain]

The department could mention that since the POS was wrongly mentioned as Kerala, the state revenue in the IGST would not have accrued to Haryana.

In such a scenario, i still agree with the view that error cannot put the taxpayer at disadvantage. The department should

a. Either take access to the system and rectify the PoS in the DRC-03 to ensure the revenue accrues to the right State, or

b. If above not possible, since it is a wrong tax paid by DRC-03 - refund should be given without time limit and the taxpayer can be asked to file the correct DRC-03.

However, a) and b) are directions which either if Tribunal or Courts gives, will be accepted by the department. They would not agree to this at adjudication stage.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, I agree with your views at serial no.4 above. All-out efforts should continue to get justice. SCN should not be issued on the basis of typographical error. In this way the taxpayer is dragged into litigation unnecessarily. 

In this scenario, justice should be provided to the assessee without the issuance of SCN.

AI Summary

Place of supply error does not amount to non-payment of IGST; administrative correction or refund should be facilitated.
An incorrect place-of-supply entry in a DRC form that follows an actual reversal and transfer of IGST to the Central Government does not amount to non-payment of IGST; the department should correct the place-of-supply administratively or refund the wrongly allocated tax so the taxpayer can make a correct payment, rather than treating the typographical error as a basis for adjudication or imposing interest and penalties.