TWO RECENT APEX COURT RULINGS IN GST

[Dr. Sanjiv Agarwal]

Denial of ITC due to Supplier’s mistake

In THE UNION OF INDIA & ORS. VERSUS BRIJ SYSTEMS LTD & ORS. - 2025 (3) TMI 1395 - SC ORDER (LB) Supreme Court of India has came down heavily on Union of India and CBIC on tax related errors in filing of returns and denial of input tax credit.

In the instant case, an SLP was filed by revenue authorities against Bombay High Court judgment in BRIJ SYSTEMS LIMITED VERSUS THE UNION OF INDIA AND ORS. - 2024 (7) TMI 1611 - BOMBAY HIGH COURT by which it was held that input tax credit could not be denied on account of mistakes or errors or mis-matches in furnishing of returns due to which input tax credit was subsequently denied to the purchaser. Merely on the ground that rectification after the stipulated period is not possible under section 37(3) and 39(9) of the CGST Act, 2017.

It has inter alia, observed and held that:

• • On account of mistakes or errors getting noticed on the input tax credit, and the input tax credit being subsequently denied to the purchaser, the Revenue has been taking the stand that rectification is not possible after expiry of the period prescribed under Section 37(3) and 39(9) of the Central Goods and Services Tax Act, 2017.
  • In all these cases, it is accepted by the revenue that there is a clerical / arithmetical mistake which is not being permitted to be corrected. Invariably, such mistakes comes to the notice of the seller, who has to fill up the online form(s), etc., after the input tax credit is denied to the purchaser(s).
  • The apex court observed that in one of the similar SLP’s.
  • The Court observed that in one of the similar SLPs, court has already dismissed SLP (C) No. 7903/2025 in the case of CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS VERSUS M/S. ABERDARE TECHNOLOGIES PRIVATE LIMITED & ORS. - 2025 (4) TMI 101 - SC ORDER.
  • Apex Court did not find merit in the present SLP and issued notice to the CBIC. The matter was listed for 28.04.2025.

Taxpayer to be allowed to correct bonafide errors

In CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS VERSUS M/S. ABERDARE TECHNOLOGIES PRIVATE LIMITED & ORS. - 2025 (4) TMI 101 - SC ORDER, Supreme Court of India has held that taxpayer should be allowed to rectify bonafide errors to avoid denial of input tax credit.

The Supreme Court of India has directed the revenue authorities to allow taxpayers to rectify bonafide errors in the GST returns leading to allowance of input tax credit. The right to correct mistakes which are in the nature of clerical or arithmetical error is a right that flows from the right to do business and should not be denied.

In the instant case, the present SLP was filed by CBIC against Bombay High Court judgment in ABERDARE TECHNOLOGIES PVT LTD & ANR VERSUS CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS & ORS - 2024 (8) TMI 142 - BOMBAY HIGH COURT, wherein the respondents were directed to open the portal within one week from the date of this order being uploaded and inform petitioner to enable them to amend / rectify Form GSTR-1 and GSTR-3B within one week.

The High Court relied upon STAR ENGINEERS (I) PVT. LTD. VERSUS UNION OF INDIA, STATE OF MAHARASHTRA AND DEPUTY COMMISSIONER OF STATE TAX-GST. - 2023 (12) TMI 729 - BOMBAY HIGH COURT where it was held that 'the State Tax officer ought to have granted the petitioner's request to rectify / amend the Form GSTR-1 for the period July 2021, November 2021 and January 2022, either through Online or manual means.'

The Apex Court observed that the matter involves the contentious issue of input tax credit denied due to clerical or technical errors in GST filings. Under the Central Goods and Services Tax (CGST) Act, 2017 buyers claim ITC based on tax invoices issued by suppliers, which must be reflected correctly in the GST returns. However, instances where suppliers inadvertently fail to file correct returns or make clerical errors have led to the denial of ITC claims to buyers, resulting in financial and compliances burdens.

Further, the right to correct mistakes in the nature of clerical or arithmetical error is a right that flows from right to do business and should not be denied unless there is a good justification and reason to deny benefit of correction. Further, software limitation itself cannot be a good justification, as software is meant to ease compliance and could be configured. Therefore, we exercise our discretion and dismiss the special leave petition, the bench said while asking the CBIC to re-examine the provisions / timelines fixed for correcting bonafide errors.

Time lilnes sould be realistic as lapse / defect invariably is realized when in put tax credit is denied to the purchaser when benefit of tax paid is denied. Purchaser is not at fault, having paid the tax amount. He suffers because he is denied benefit of tax paid by him. Consequently, he has to make double payment.

It inter alia, observed / held that:

• Sections 37(3) and 39(9) of the CGST Act, 2017 limit error corrections, leading to litigation and compliance burdens of businesses.
• CBIC must re-examine the provisions / timelines fixed for correcting the bonafide errors.
• Time lines should be realist as lapse / defect invariably is realized when input tax credit is denied to the purchaser when benefit of tax paid is denied.
• Purchaser is not at fault, having paid the tax amount. He suffers because he is denied benefit of tax paid by him. Consequently, he has to make double payment.
• Human errors and mistakes are normal, and errors are also made by the Revenue. Right to correct mistakes in the nature of clerical or arithmetical error is a right that flows from right to do business and should not be denied unless there is a good justification and reason to deny benefit of correction.
• Software limitation itself cannot be a good justification, as software are meant ease compliance and can be configured.

The Apex Court did not find merit in SLP and dismissed it because the impugned Bombay High Court judgment was just and fair, as there was no loss to the revenue.