Tax Liability Paid through Credit Instead of Cash as per Rule 86B

[ROHIT GOEL]

In a case where the tax liability was mandatorily required to be discharged in cash in accordance with Rule 86B, but was inadvertently paid through utilization of Input Tax Credit (ITC), and this irregularity has subsequently been identified during a departmental audit, whether the taxpayer is eligible to claim a refund of the tax amount earlier paid through credit, after the same liability has been correctly discharged in cash in compliance with Rule 86B?

AI Summary

Taxpayer paid Rule 86B liability using ITC instead of cash, refund eligibility uncertain after correction A taxpayer inadvertently paid mandatory cash-based tax liability under Rule 86B using Input Tax Credit instead of cash. After departmental audit identified this irregularity and the liability was correctly paid in cash, the question arose whether the credit amount could be refunded. Forum participants indicated that utilized ITC generally cannot be refunded as it wasn't paid in cash, with refunds typically limited to specific circumstances. However, there's possibility of treating it as excess tax payment eligible for re-credit to ITC ledger or refund if sanctioned by authorities and not time-barred, as no tax can be retained without legal authority.