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2020 (1) TMI 833 - HC - GSTRecovery of short paid IGST alongwith interest - IGST wrongly paid under CGST head - HELD THAT - Admittedly, the petitioner Company had discharged their tax liability under the IGST head, but inadvertently or otherwise, the petitioner deposited the amount under the CGST head. It is not the case that the petitioner Company has concealed the transaction or has committed any fraud in discharging its tax liability. It is a plain case in which the tax has been paid by the petitioner to the Central Government, but not under the IGST head, rather under the CGST head. There appears to be substance in the submission of learned counsel for the petitioner, inasmuch as, by deliberately depositing the cash in the electronic cash ledger for the CGST head, at the place of IGST head, possibly no benefit was going to be derived by the petitioner Company. In that view of the matter, we are not in a position to doubt the bona fides of the petitioner Company, that due to the initial stage of the CGST regime, there might be some confusion, and the cash was wrongly deposited in the wrong electronic cash ledger. There is no provision of cross utilization of the fund as in case of 'electronic credit ledger'. Benefit of the provisions of Section 77 (1) of the CGST Act, read with Section 19(2) of the IGST Act - HELD THAT - The contention of the learned counsel for the CGST that these provisions are for the persons acting bona fide, may also be accepted, but there is nothing on the record of this case to show that the petitioner Company had not acted bona fidely, particularly in view of the fact that the transaction relates to the early stages in which the GST regime had been implemented, and there might be some confusion prevailing at that initial stage - In that view of the matter, we do not find any plausible reason whatsoever, to deny the petitioner Company the benefit of the provisions of Section 77 (1) of the CGST Act, read with Section 19(2) of the IGST Act. The petitioner Company is directed to deposit the amount of ₹ 41,98,642/-, under the IGST head within a period of 10 days from today, towards the liability of September, 2017. The petitioner shall not be liable to pay any interest on the said amount. The petitioner shall also be entitled to get the refund of the amount of ₹ 41,98,644/- deposited by them under the CGST head, or they may get the amount adjusted against their future liabilities, in accordance with law, as they may choose - application allowed.
Issues involved:
1. Liability to pay short-paid IGST. 2. Bona fide mistake in tax payment under the wrong head. 3. Applicability of Section 77 of the CGST Act and Section 19 of the IGST Act. 4. Adjustment of tax paid under the wrong head. 5. Liability to pay interest on short-paid IGST. Issue-wise detailed analysis: 1. Liability to pay short-paid IGST: The petitioner company was directed by the respondent to pay the short-paid IGST amounting to ?41,98,642/- along with interest within a week, failing which recovery actions would be initiated. The petitioner had shown a deficient liability in IGST and an excess in CGST due to a mistake while filing GSTR-3B. 2. Bona fide mistake in tax payment under the wrong head: The petitioner contended that the tax was paid under the wrong head (CGST instead of IGST) due to a bona fide mistake during the early phase of GST implementation. The petitioner argued that it was not a case of short payment but a misclassification of the transaction as intra-State instead of inter-State. The court found merit in the petitioner's claim of a bona fide mistake, considering the initial stages of the GST regime and the lack of any fraudulent intent. 3. Applicability of Section 77 of the CGST Act and Section 19 of the IGST Act: The petitioner argued that under Section 77(1) of the CGST Act, they were entitled to a refund of the wrongly paid CGST, and under Section 19(2) of the IGST Act, they were not liable to pay interest on the IGST amount. The court agreed, noting that these provisions apply to bona fide mistakes, and there was no evidence of mala fide intent by the petitioner. The court emphasized that the petitioner was entitled to the benefits of these sections due to the bona fide nature of the mistake. 4. Adjustment of tax paid under the wrong head: The petitioner sought adjustment of the wrongly paid CGST against the IGST liability. The court noted that while Section 49(3) of the CGST Act does not allow cross-utilization of funds from the electronic cash ledger, Section 77(1) of the CGST Act and Section 19(2) of the IGST Act provide for a refund and exemption from interest for bona fide mistakes. The court directed the petitioner to deposit the IGST amount within 10 days and allowed them to claim a refund or adjustment of the wrongly paid CGST against future liabilities. 5. Liability to pay interest on short-paid IGST: The respondents argued that interest was payable due to the incorrect classification of the transaction. However, the court held that the petitioner was not liable to pay interest, citing Section 19(2) of the IGST Act, which exempts interest for bona fide mistakes. The court found no evidence of mala fide intent and acknowledged the initial confusion during the early stages of GST implementation. Conclusion: The court quashed the letter dated 26.04.2019, which demanded the short-paid IGST along with interest. The petitioner was directed to deposit the IGST amount within 10 days without interest and was entitled to a refund or adjustment of the wrongly paid CGST. The writ application was allowed with these directions and observations.
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