TaxTMI 
TaxTMI 
2020 (5) TMI 169
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....nthly GST returns, and consequently seeking refund of the excess taxes paid. Brief Factual Background - Controversy 2. To fully comprehend the tax provisions and circulars that are coming in the way of the Petitioner to correct the errors it has noticed, we would have to advert to the facts of the case and also reflect upon the statutory scheme of the GST filings and also take note of the circumstances that led to this situation. To begin with, let us briefly note the facts - Petitioner is engaged in the business of providing telecommunication services in India, including Delhi, by virtue of license granted by the Department of Telecommunication, Government of India. With the implementation of GST, it took registration in each and every State and Union Territory and now has 50 registrations under GST laws for making payment of CGST, SGST and IGST. Since the compliance regime under the GST laws is significantly different and the statutory provisions provide for a complete electronic model of compliances, Petitioner remoulded its system from the centralized registration under the erstwhile service tax regime, to multiple registrations under GST in order to bring it in conformity wi....
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....there has been excess payment of taxes, by way of cash, to the tune of approximately Rs. 923 crores. This was occasioned to a great degree due to non-operationalization of Forms GSTR-2A, GSTR-2 and GSTR-3 and the system related checks which could have forewarned the petitioner about the mistake. Moreover, since there were no checks on the Form GSTR-3B which was manually filled up by the Petitioner, the excess payment of tax went unnoticed. Petitioner now desires to correct its returns, but is being prevented from doing so, as there is no enabling statutory procedure implemented by the Government. Impugned Circular- Existing Framework 4. On 01.09.2017, by the Circular No. 7/7/2017-GST, the Government provided for system based reconciliation of information furnished in Form GSTR-1 and Form GSTR-2 with Form GSTR-3B. Paragraph 6 of this circular specifically reiterated the fact that any differences in the details of outward supplies and ITC will be corrected in that particular month to which the details pertain 5. However, on 29.12.2017, by issuing Circular No. 26/26/2017-GST, the Government kept the Circular No. 7/7/2017-GST in abeyance due to . Paragraph 9 of this circular further ....
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...., the Petitioner has a statutory right to fill all the necessary details, when the aforesaid provisions of the Act became enforceable. He submits that the inability of the Respondents to run their IT system as per the structure provided under the CGST Act cannot prejudice the rights of a registered person. Mr. Gulati explains that on account of major shift from the single service tax registration regime, to GST, it resulted in Petitioner having to collate crores of transactions both on the output side and input side. Besides, registrations were to be obtained in 29 States and 7 Union Territories. This required enormous compilation of data and was a humongous task. The possibility of error in compilation of data cannot be ruled out especially since the inbuilt self-check mechanism contemplated under the CGST Act had not been activated. Elaborating further, Mr. Gulati submits that Form GSTR-3B, prescribed under Rule 61 (5) is only a summary return that has been introduced by the Government in absence of Form GSTSR-2 and 3 being made operational. This Form is filled in manually and, therefore, has no inbuilt checks and balances that could ensure that the data uploaded by the Petitione....
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....an be verified prior to rectification. 9. Per contra, Mr. Harpreet Singh, learned Sr. Standing counsel on behalf of the GST department submitted that the impugned circular in the present petition does provide for the rectification of mistakes pertaining to earlier tax period in any subsequent tax period. He submitted that such changes have to be incorporated in the return for the tax period in which the error is noted. The assessee cannot, however, reflect the change in Form GSTR-3B of the original tax period. The rationale behind such a restriction was sought to be explained by referring to sub-section (9) of Section 39 of the CGST Act, 2017. 10. Mr. Singh, further submitted that vide Section 17 (c) (i) of the CGST (Amendment) Act, 2018, certain amendments have been carried out in the aforesaid provision. He clarified that the amended provisions have not been made operational yet, since notification No. 02/2019-Central Tax dated 29.01.2019 clearly provides that Section 17 of the CGST (Amendment) Act, 2018 shall not come into force. Nevertheless, even if this amendment would eventually come into effect, it shall apply prospectively from a future date and would not apply to the ta....
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....a short one, however, since the same concerns the scheme of the CGST Act, we would have to delve into the concepts of filing of returns and the statutory provisions governing the same. The Scheme of filing of returns as envisaged by the CGST Act is explained herein below: a) Section 37(1) of the CGST Act provides that a registered person is required to file a return (Form GSTR- 1) containing details of his outward supply for the tax period i.e. a month. These details of outward supplies of a registered person are communicated to the recipients in an auto-populated return (Form GSTR-2A) under Section 37(1) read with Section 38(1) of the CGST Act. b) Section 38(1) of the CGST Act provides that a registered person shall verify, validate, modify or delete such details of inward supplies communicated under Section 37(1) of the CGST Act in the Form GSTR-2A. Thereafter, under Section 38(2) of the CGST Act the recipient files a return (Form GSTR-2) containing details of his inward supplies based on Form GSTR 2A. These details are then communicated to the suppliers under Section 38(3) of the CGST Act and suppliers can accept or reject the details under section 37(2) and Form GSTR-1, sha....
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.... of the CGST Act wherein a registered person could rectify the errors or omissions pertaining to a tax period in the return to be furnished for such tax period itself through a self-policing and auto-populated interaction on the system. b) The 2nd stage of rectification is provided under Section 38 (5) and 39 (9) of the CGST Act wherein, in respect of only unmatched details - which could not be corrected at the first stage, rectification could be done in the return to be furnished for the month during which such omission or incorrect particulars were noticed. 15. While the GST regime envisaged the filing process and recording of ITC and payment of taxes as above, admittedly, due to system issues and under preparedness with regard to the extent of data to be processed, Form GSTR-2, and 3 were not made operational; and have been now completely done away with. Form GSTR-2A was made operational only in September 2018 by the Government. This Form is also valid in respect of the past periods commencing July 2017. The Respondents do not dispute that the statutory scheme envisaging the filing of return GSTR-2 and 3 could not be put into operation and has been indefinitely deferred. This....
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....e eligible ITC in the months of July - September 2017 in the form GSTR- 3B has resulted in excess payment of cash by the Petitioner. 17. Now that the correct figures are known to the Petitioner, and limited rectification of returns is permissible, why is Petitioner's grievance not redressed? The answer lies in the refund provisions that we shall now allude to briefly. These provisions are the stumbling block for the petitioner to remedy the situation. ITC is taken on the basis of the invoices issued to a registered person providing input/output services. This ITC is credited to the electronic credit ledger [Section 2 (46) of the CGST Act] under section 49(2) of the CGST Act. The output tax liability of the supplier can be paid through utilization of ITC available in the electronic credit ledger, or by utilization of the amount available in the electronic cash ledger [Section 2(43) of the CGST Act] under section 49 (1) of the CGST Act. Section 54 (1) of the CGST Act provides for the refund of the amount of excess paid tax. The said provision read with Circular dated 29.12.2017, deals with the refund of excess tax paid. Under the proviso to section 54 (1) read with Section 49(6), re....
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..... 18. While arriving at this conclusion we also have to take into account that the Respondents have absolutely failed in operationalizing the forms that were originally envisaged under the Act. The scheme of the CGST Act as introduced, contemplated validation and verification of data which was to be uploaded vide Form GSTR-2 & 3. However, in absence of such statutory forms being operationalized on account of lack of technical infrastructure, Form GSTR-3B was introduced and it was required to be filled in manually. There cannot be any dispute that Form GSTR-3B has been brought into operation instead of Form GSTR-2 and GSTR-3. This Form GSTR-3B as introduced by Rule 61 (5) being at variance with the other statutory provisions does not permit the data validation before it is uploaded. As per the Respondents, Form GSTR-3B is a return not in addition to GSTR-3, but in place of it, till such time GSTR-3 gets operationalized. Form GSTR-3B which has been brought into operation by virtue of Section 168 of the CGST Act, in comparison with Form GSTR-3 is a truncated version. Thus, we find merit in the submission of Mr. Gulati that with this change brought in by the Respondents, the form ori....
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....y in the month in which the error is noticed, and not in the month to which the data relates. The relevant portion of the said circular is reproduced hereinbelow: " 3. Amendment / corrections / rectification of errors: 3.1 Various representations have been received wherein registered persons have requested for clarification on the procedure for rectification of errors made while filing their FORM GSTR-3B. In this regard, Circular No. 7/7/2017-GST dated 1st September 2017 was issued which clarified that errors committed while filing FORM GSTR - 3B may be rectified while filing FORM GSTR-1 and FORM GSTR-2 of the same month. Further, in the said circular, it was clarified that the system will automatically reconcile the data submitted in FORM GSTR-3B with FORM GSTR-1 and FORM GSTR-2, and the variations if any will either be offset against output tax liability or added to the output tax liability of the subsequent months of the registered person. 3.2 Since, the GST Council has decided that the time period of filing of FORM GSTR-2 and FORM GSTR -3 for the month of July 2017 to March 2018 would be worked out by a Committee of officers, the system based reconciliation prescribed un....
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.... statutory provisions. We, therefore, do not find any cogent reasoning behind the logic for restricting rectification only in the period in which the error is noticed and corrected, and not in the period to which it relates. There is no provision under the Act that has been brought to our notice which would restrict such rectification. In fact, the Respondents' contention is to the effect "thus, the Act does not provide that the data filled by a registered person has to be validated in that month itself. Accordingly Circular No. 26/26/2017-GST dated 29.12.2017 was issued providing that rectification of errors can be done, concurrently in that month in which the errors is known and not in the month to which the data relates" is palpably flawed. The restriction if any, that can be introduced by way of a circular, has to be in conformity with the scheme of the Act and the provisions contained therein. In fact, as noticed above, the earlier Circular No. 7/7/2017-GST does recognize that the reconciliation is based on amended ITC of the relevant month. This is in terms of provisions of CGST Act and the Respondents' contention is contrary to the same. Thus, the constraint introduced by pa....
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....tral Board of Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the revenue." In order to elucidate the position in this respect, the five judge bench in Commissioner of Central Excise, Bolpur vs. Ratan Melting and Wire Industries (supra) referred to its earlier decision in Kalyani Packaging Industry vs. Union of India (2004) 6 SCC 719 and observed that Para 11 of Dhiren Chemical Industries (supra) was rightly clarified therein. In this background, the Court held in paragraph 7 as under : "7. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is....
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....tionality. Respondents have admitted that the facility of Form GSTR-2A was not available prior to 2018 and, as such, for the months of July, 2017 to September, 2017 the scheme as envisaged under the CGST Act was not implemented. Respondents have also clearly acknowledged that there could be errors in Form GSTR-2A which may need correction by the parties and have, in fact, permitted the rectification, clearly reinforcing the stand of the Petitioner. The refund of excess cash balance in terms of Section 49 (6) read with Section 54 of the CGST Act does not effectively redress Petitioner's grievance. Therefore, the only remedy that can enable the Petitioner to enjoy the benefit of the seamless utilization of the input tax credit is by way of rectification of its annual return i.e. GSTR-3B. The hypothetical situations canvassed by Mr. Singh, would not deter us from granting the relief sought by the Petitioner. Each case would have to turn on its own facts. As and when a situation is brought to our notice, we would have to test the legality of the provision at that stage. Merely if there is any fanciful or absurd outcome in a given situation, as illustrated by Mr. Harpreet Singh, it doe....