TaxTMI 
TaxTMI 
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?
Tax Liability Paid through Credit Instead of Cash as per Rule 86B
16 Jun 2025 
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Input Tax Credit refund: excess tax paid by credit may be claimed after cash discharge if not time-barred.
Whether tax paid through utilisation of Input Tax Credit despite a mandatory cash-discharge requirement can be refunded after the liability is later discharged in cash depends on two points: ITC is generally non-refundable except in specified circumstances, but a subsequent cash payment may create an excess or double payment which can be adjusted or claimed as a refund (including by re-credit) if not time-barred and subject to procedural sanction. The relevant date for limitation is argued to be the date of the cash payment, i.e., the cause of action. (AI Summary)
Whether tax paid through utilisation of Input Tax Credit despite a mandatory cash-discharge requirement can be refunded after the liability is later discharged in cash depends on two points: ITC is generally non-refundable except in specified circumstances, but a subsequent cash payment may create an excess or double payment which can be adjusted or claimed as a refund (including by re-credit) if not time-barred and subject to procedural sanction. The relevant date for limitation is argued to be the date of the cash payment, i.e., the cause of action. (AI Summary)