TaxTMI 
TaxTMI 
16 Oct 2026 
A Payment Error and an Unpaid Liability Are Different Questions
A taxpayer may correctly identify a transaction and pay tax, yet enter the payment under the wrong GST head. Instead of paying IGST, the taxpayer may mistakenly credit the payment to CGST and SGST. A comparison of returns may then show an IGST shortfall without revealing the corresponding excess under the other heads. The question is not merely whether the IGST column shows a deficit. The question is whether the Department can recover the full amount again without recognising the tax already paid. A payment under the wrong head and a failure to pay tax are not necessarily the same situation.
The GSTAT, Thiruvananthapuram Bench, examined this distinction in Sunil Steels Versus The Commissioner Of Keralam State Gst, Thiruvananthapuram. - 2026 (10) TMI 769 - GSTAT THIRUVANANTHAPURAM. The GSTAT, Thiruvananthapuram Bench, comprising Hon'ble Shri Subramanya Rayaprol, Vice President, and Hon'ble Shri Ramamoorthi Sriram, Member (Technical), decided Appeal No. APL/14/TVP/2026 through Final Order No. 09/TVP/KERALAM/2026. The decision has two important aspects. It rejects confirmation of a demand on grounds not raised in the show-cause notice, and it permits adjustment of the amounts paid under the wrong head. However, it also preserves recovery of the genuine shortfall remaining after adjustment. The taxpayer obtained protection against duplicate recovery, not exemption from an unpaid liability.
The Return Mismatch Required Examination of Payments Under All Relevant Heads
A show-cause notice dated 18.12.2023 was issued under Section 73 of the CGST Act, 2017, alleging short payment of IGST based on a comparison of Form GSTR-1 and Form GSTR-3B. The notice also stated that the taxpayer had not corrected the relevant return particulars within the statutory period. The State Tax Officer, Tax Payer Services Circle, Thiruvalla, confirmed the demand by an order dated 15.04.2024. The Order-in-Appeal dated 15.11.2025 rejected the first appeal, leading to the second appeal before the Tribunal.
The taxpayer explained that the apparent IGST shortfall resulted from a clerical error while submitting Form GSTR-3B. The taxpayer had paid the IGST amount under CGST and SGST. It relied on its returns and reconciliation to establish that the Government had already received the corresponding payments. However, the Department identified a numerical qualification: the available excess CGST and SGST totalled Rs.5,42,907.92, whereas the IGST shortfall was Rs.5,57,957.03. The available amounts therefore did not completely cover the liability. This made the dispute more precise. The Tribunal had to decide both whether adjustment was permissible and what amount would remain unpaid after giving that adjustment.
The Department Relied on Separate Tax Heads and the Refund Mechanism
The Department argued that CGST, SGST and IGST arise under separate enactments and are credited through distinct statutory arrangements. In its view, payment under CGST or SGST did not discharge liability under IGST. It relied on Section 77 of the CGST Act, 2017; the corresponding State provision; Section 19 of the IGST Act, 2017; and Rule 89(1A) of the CGST Rules, 2017. It held that the taxpayer should pay the tax under the correct head and then seek a refund of the amounts wrongly paid. The Department also pointed to the absence of a refund claim and the failure to correct the returns within time.
A further objection concerned the precedent the taxpayer relied upon. The Department argued that Rejimon Padickapparambil Alex Versus Union Of India, State Of Kerala, Goods And Services Tax Network, New Delhi, Commissioner, Office Of The Commissioner, State Goods And Service Thiruvananthapuram, State Tax Officer Ernakulam. - 2024 (12) TMI 399 - KERALA HIGH COURT dealt with ITC reported under incorrect heads, whereas the present dispute concerned output tax paid under incorrect heads. That distinction deserved examination rather than dismissal as irrelevant. Wrong reporting of ITC, wrong classification of a supply and wrong discharge of output tax can involve different statutory requirements. The Tribunal nevertheless concluded that the jurisdictional High Court's principles applied to the established clerical error in this case. Importantly, it separately accepted the Department's unrefuted objection regarding the remaining numerical shortfall.
The Final Order Could Not Introduce a Different Allegation
The show-cause notice concerned an IGST mismatch and failure to correct return particulars. However, the adjudication order rejected the taxpayer's explanation by invoking Section 16(2)(a) of the CGST Act, 2017, and the corresponding provision of the Kerala State Goods and Services Tax Act, 2017. These provisions relate to possession of an invoice, debit note, or other prescribed document for claiming ITC. The notice had not alleged a breach of that requirement. The taxpayer was therefore asked to answer one case, but the Adjudicating Authority rejected its defence on a different statutory ground. The adjudication order could not replace the notice's allegation with an unannounced ground.
This was not merely a complaint about an incorrect section number. The Tribunal identified a change in the basis of the demand. As additional statutory context, Section 75(7) of the CGST Act, 2017 prohibits confirmation on grounds other than those specified in the notice. The Tribunal did not expressly cite that provision, but its finding is consistent with this safeguard. For example, Section 75 of the CGST Act, 2017 provides that a notice alleging unpaid output tax requires a response about the liability and payment, whereas an allegation that the taxpayer lacks documents for ITC requires a different defence. An opportunity to reply is meaningful only when the taxpayer knows the actual case it must meet.
A Rejection of the Defence Needed Reasons and Reconciliation
The taxpayer had not merely denied the mismatch. It offered an explanation that could alter the amount recoverable: the IGST had allegedly been paid under CGST and SGST. That explanation required examination of the relevant returns, payments and reconciliation. The adjudication order, however, referred to ITC provisions and a possible loss to the exchequer without adequately addressing the payment explanation. The Tribunal found that it had not analysed or answered the contentions. Together with confirmation on a new ground, this was sufficient to render the adjudication order unsustainable.
A statement that the reply is unacceptable cannot substitute for checking the figures. A reasoned decision should explain whether the claimed excess exists, whether it relates to the disputed transactions, whether it remains available, and why the adjustment is accepted or rejected. For example, if the taxpayer identifies corresponding excess payments but the officer finds that those amounts relate to another liability, the order should demonstrate that connection. Conversely, if the records establish the clerical error and available excess, the order must address their legal effect. Reasoning protects both sides: it enables the taxpayer to understand the decision and allows the Department to defend a properly established demand.
The Jurisdictional High Court's Reasoning Guided the Adjustment
The Tribunal examined Rejimon Padickapparambil Alex Versus Union Of India, State Of Kerala, Goods And Services Tax Network, New Delhi, Commissioner, Office Of The Commissioner, State Goods And Service Thiruvananthapuram, State Tax Officer Ernakulam. - 2024 (12) TMI 399 - KERALA HIGH COURT. The decision concerned an inadvertent error in reporting IGST credit under CGST and SGST. It approved reasoning that looked at the substance of the credit position rather than treating a technical classification error as an automatic basis for recovery. The High Court also referred to an administrative order discussing adjustment principles and the electronic credit ledger. The Tribunal considered that reasoning applicable to the present dispute and followed it as the law laid down by the jurisdictional High Court.
The factual difference raised by the Department must still be evident. The earlier case and Sunil Steels were not identical merely because both involved different GST heads. The significance lies in the principle the Tribunal applied: an established clerical error should be examined in light of the actual payment or credit position, not mechanically converted into a demand that ignores amounts already available. Judicial discipline required application of the binding reasoning, but it did not remove the need to verify the taxpayer's figures. That explains why the Tribunal accepted the adjustment while refusing the broader assertion that the whole IGST liability stood discharged.
The Other Authorities Supported Recognition of Established Wrong-Head Payments
The taxpayer relied on Saji S., Proprietor, Adithya and Ambadi Traders, Ranjith R., Proprietor, Ranjith Roadlines Versus The Commissioner, State GST, The Assistant State Tax Officer - 2018 (11) TMI 954 - KERALA HIGH COURT. That case concerned amounts remitted under SGST instead of IGST in connection with detained goods. The Kerala High Court directed transfer of the amounts and did not allow the taxpayer to continue suffering merely because the administrative adjustment could take time. JAYASREE TRAVELS AND TOURS COMPANY VALLAKKADAVU Versus UNION OF INDIA, THE PRINCIPAL SECRETARY, GST COUNCIL, GOODS AND SERVICES TAX NETWORK, THE COMMISSIONER STATE GOODS AND SERVICES TAX DEPARTMENT, THE NODEL OFFICER FOR STATE GST STATE GOODS AND SERVICES TAX, THE DEPUTY COMMISSIONER THIRUVANANTHAPURAM - 2022 (11) TMI 1600 - KERALA HIGH COURT, for consideration of refund and possible adjustment against the amount due. These authorities supported examining the available remedy rather than disregarding the payment.
The taxpayer also cited M/s Ocean E Mart Thru. Authorized Signatory Sandeep Kumar Yadav Versus State Of U.P. Thru. Addl. Chief Secy. Deptt. Of Institutional Finance U.P. Lko. And 2 Others. - 2025 (12) TMI 933 - ALLAHABAD HIGH COURT, concerning reconsideration after accounting for CGST and SGST payments, and SYA Homes Versus Assistant Commissioner (ST), Vadapalani Assessment Circle, Chennai, The Assistant Commissioner (ST) (FAC), Deputy Commissioner (ST), Commercial Taxes Department, Chennai - 2026 (7) TMI 909 - MADRAS HIGH COURT. In the latter, the payment error operated in the reverse direction: IGST had been paid instead of CGST and SGST. As recorded in the Tribunal's order, the underlying concern was the burden of having to pay again when the liability had already been discharged under the wrong head. These decisions support appropriate adjustment on established facts; they should not be reduced to a universal permission for taxpayers to transfer amounts between heads without following the applicable law.
The Credit Ledger Analogy Must Be Used Within Its Legal Limits
The reasoning approved in Rejimon Padickapparambil Alex Versus Union Of India, State Of Kerala, Goods And Services Tax Network, New Delhi, Commissioner, Office Of The Commissioner, State Goods And Service Thiruvananthapuram, State Tax Officer Ernakulam. - 2024 (12) TMI 399 - KERALA HIGH COURT described the electronic credit ledger as a wallet with separate compartments for IGST, CGST and SGST. This helps explain why examining a single compartment alone may give an incomplete picture. CBIC Circular No.192/04/2023-GST, dated 17.07.2023, addresses interest on wrongly availed IGST credit. For that purpose, it requires considering the combined IGST, CGST and SGST credit balance when determining utilisation under Section 50(3) of the CGST Act, 2017, read with Rule 88B(3) of the CGST Rules, 2017. Its exclusion of compensation-cess credit also demonstrates that the exercise has defined limits.
The analogy must not be stretched beyond its purpose. It does not abolish the statutory rules governing credit utilisation or turn every GST balance into freely transferable money. For example, Section 49(5) of the CGST Act, 2017 restricts using CGST credit directly for SGST liability and vice versa. The fact that eligible balances are considered together for a particular interest inquiry does not remove those restrictions. Equally, an electronic cash-ledger deposit, an unutilised ITC balance and tax already discharged are distinct accounting and legal positions. Implementing the Tribunal's direction requires identifying the relevant amounts and making the permitted adjustment, not assuming that every entry can simply be moved.
The Statutory Refund Route Was Not Abolished
The Department's reliance on the refund framework raised a genuine legal question. Section 77 of the CGST Act, 2017 and Section 19 of the IGST Act, 2017 address situations where a supply treated as intra-State is subsequently held to be inter-State, or vice versa. Rule 89(1A) of the CGST Rules, 2017 prescribes the refund route for the relevant wrong-tax payment, including the time limit for payment under the correct head. These provisions cannot be treated as deleted merely because an adjustment was allowed in this appeal.
As additional context, CBIC Circular No.162/18/2021-GST dated 25.09.2021 explains that "subsequently held" includes discovery by the taxpayer as well as a finding by the tax officer, subject to the stated requirements. This circular was not cited in the Tribunal's order. A mistake about the nature of a supply must therefore be distinguished from a clerical mistake in entering an otherwise correctly understood liability. Sunil Steels permits adjustment in the circumstances established before the Tribunal; it does not declare the statutory refund process unnecessary in every wrong-head case. Nor does it generally reopen expired deadlines for correcting returns.
The Actual Figures Prevented Complete Extinguishment of the Demand
The decisive qualification was numerical. The Department established that the available excess CGST and SGST was Rs.5,42,907.92, while the IGST shortfall was Rs.5,57,957.03. The order referred to the difference of Rs. 15,049.11 as approximately Rs. 15,049. The taxpayer did not refute this position despite opportunities. The Tribunal accepted its legal argument for adjustment, but not its factual claim that the whole liability was covered. This distinction matters when describing the outcome as a successful appeal.
A simple illustration shows why both conclusions can stand together. Suppose an IGST liability of Rs.1 lakh is matched by an established wrong-head payment of Rs.90,000. Recognition of the Rs.90,000 prevents recovery of that amount again, but it does not constitute payment of the remaining Rs.10,000. The same approach governed the present case. The Tribunal's broad statement that wrong-head payment did not constitute non-payment under Section 73 of the CGST Act, 2017, and the corresponding Kerala provision must be read with its operative direction preserving the residual liability. The protected amount was the amount available for adjustment; the genuinely unpaid balance remained payable.
Relief Against Duplicate Recovery Did Not Mean Complete Interest Immunity
The Tribunal expressly permitted recovery of the amount remaining after set-off in cash, together with interest under the applicable legal provisions. It did not prescribe a fixed interest rate or a detailed computation period. The decision should therefore not be described as cancelling all interest merely because the original error was clerical. The legal basis, amount and relevant period for interest must follow the governing provisions and the actual residual liability.
Equally, not every wrong-head situation attracts interest in the same manner. For additional statutory context, Section 19(2) of the IGST Act, 2017 provides protection from interest on IGST in the specified situation involving a transaction considered intra-State but subsequently held inter-State. The conditions of that provision require separate examination; it cannot automatically erase a genuine unpaid amount. The interest discussion concerning wrongly availed credit in Circular No.192/04/2023-GST also addresses a different inquiry from unpaid output tax. The nature of the error, the amounts paid and the applicable interest provision must be identified before assuming either a liability or an exemption.
The Relief Requires Adjustment First and Recovery of the Lawful Balance
The Order-in-Appeal was set aside, and the appeal was allowed on specified terms. The excess CGST and SGST arising from the clerical mistake was permitted to be set off against the IGST shortfall through the electronic credit ledger. Any amount still payable after that exercise remained recoverable in cash, with applicable interest. The appeal was not simply remanded for the same demand to be reconsidered, nor was the entire underlying liability declared extinguished. The operative directions provided a practical resolution: recognise the established excess and recover the balance.
For taxpayers, the strongest defence is a clear reconciliation linking the disputed liability, return entries, wrong-head payments and available amounts. The records should also show that the same amount has not already been refunded or otherwise exhausted. For the Department, a mismatch should trigger an examination rather than replace it, and the final order must remain within the notice and address the material defence. The lasting principle is balanced: a clerical tax-head error should not produce duplicate recovery, but neither should it conceal a genuine shortfall. Fair administration requires both proper procedure and accurate arithmetic.
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