Seeking Refund against the ITC reversal with the direction of the GST audit wing

[THYAGARAJAN KALYANASUNDARAM]

Dear Experts,

One of my clients was audited by the Audit Officials under Section 65 of the GST Act, 2017. While determining the ITC reversal under Rule 42 of the CGST Rules, 2017, the Audit Officials erroneously included not only the ITC availed during the relevant financial year but also the opening balance of ITC carried forward from the previous year. Based on this incorrect computation, and under coercion, my client reversed the amount from the excess ITC available in the Electronic Credit Ledger through Form DRC-03.

Subsequently, during the statutory audit, it was discovered that the reversal had been wrongly computed by including the opening balance of ITC. Accordingly, my client filed a refund application for the erroneous reversal. However, the said refund application was rejected without assigning any reasons.

In these circumstances, kindly advise whether there are judicial precedents (citations) supporting the proposition that ITC reversal cannot be demanded on opening balances carried forward, and whether a writ petition can be filed before the High Court seeking a direction to refund the amount erroneously reversed under the directions of the Audit Officials.  

Thanks in Advance

AI Summary

Can opening ITC balances be excluded from reversal under Rule 42 and Section 65; compel refund after erroneous DRC-03? A taxpayer audited under Section 65 was directed to reverse ITC under Rule 42, but the audit officials included opening ITC balances carried forward from the prior year; the taxpayer, under coercion, reversed the amount via Form DRC-03. A later statutory audit found the reversal incorrect because it included opening balances; the taxpayer's refund application for the erroneously reversed amount was rejected without reasons. The taxpayer seeks whether there are judicial precedents that opening balances cannot be subjected to ITC reversal and whether a writ petition to the High Court can compel refund of the amount reversed under audit directions.