IMPORTANT POINT
The court ruled that inadvertent misclassification of IGST as CGST and SGST does not constitute excess credit utilization, especially when no revenue loss occurs.

JUDGMENT :

Dr. A.K.Jayasankaran Nambiar, J.

The petitioner in WP(C).No. 40005 of 2023 is the appellant before us, aggrieved by the judgment dated 19.12.2023 of a learned Single Judge dismissing the Writ Petition.

2. The brief facts necessary for the disposal of the Writ Appeal are as follows:

The appellant runs a proprietorship concern with the name and style 'Padiken Silks', and is a registered dealer on the rolls of the 5th respondent for the purposes of payment of GST. During the assessment year 2017-2018, and in particular, during the period from July 2017 to March 2018, the appellant received various inward supplies of goods, both inter-state and intrastate. For the inter-state inward supplies, on which IGST (Integrated Goods and Services Tax) was paid by the supplier, the appellant had to avail input tax credit by resorting to a procedure whereby he had to show the IGST amount paid by the supplier, as the IGST paid by him in the Form GSTR 2A generated by him, and thereafter, if there was no outward supply on which IGST had to be paid by him he had to show the same IGST amount as Credit available in the Form GSTR 3A and then split the IGST amount into the CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax) components in the said Form 3A before utilising the same for the purposes of payment of outward taxes.

In the instant case, however, on receipt of the IGST paid inward supplies from outside the State, the appellant, instead of showing the IGST component in the eligible credit details in Form GSTR-3B, inadvertently showed the IGST component as nil and added the bifurcated CGST and SGST components of IGST to the existing figures showing eligible CGST and SGST credit. This resulted in a mismatch between Form GSTR 2A and Form GSTR 3B maintained in relation to the assessee. What is significant, however, is that it is undisputed that it was the amount shown as IGST in Form GSTR 2A that was split into the components of CGST and SGST and added to the corresponding columns in Form GSTR 3B.

3. The Assessing Authority noticed this mismatch and opined that this mismatch had resulted in the appellant utilising 'unavailable credit' towards payment of CGST and SGST on outward supplies. He therefore proceeded to issue a notice to the appellant demanding the return of the CGST/SGST amounts allegedly utilised in excess by the appellant. The proceedings initiated through the said notice culminated in Ext.P14 order confirming the demand against the appellant. It was Ext.P14 order that was impugned in the Writ Petition, inter alia, on the contention that there had been no revenue loss involved in the exercise carried on by the appellant, and that there was no jexcess credit availed by the appellant.

4. The learned Single Judge, who considered the matter noticed that the appellant had, by way of abundant caution, also sought a refund of the amounts demanded from him, from the credit that was available with the department consequent to the payment of IGST by the supplier outside the State. The learned Judge, therefore, merely directed the 5th respondent to consider and pass orders on the refund application without actually pronouncing on the legality of the actions of the respondent.

5. In the appeal before us, it is the submission of Sri. Jaikrishna R, the learned counsel for the appellant, that the demand in Ext.P14 order that was impugned in the Writ Petition was wholly unsustainable since there was admittedly no excess utilisation of credit since the appellant was entitled to take credit on the IGST paid on inter-state inward supplies. The only mistake that was occasioned by the appellant was that he had not shown the IGST amounts separately in Form GSTR 3B against available credit and had resorted to an exercise of splitting the IGST amount towards CGST and SGST since he did not have any outward supply that attracted IGST.

6. We have also heard Sri. P.R. Sreejith, the learned Standing counsel for the 3rd respondent, and