Shree Nanak Ferro Alloys Pvt Ltd vs 1. The Union of India and 2. The Superintendent, Range-I

The case at hand involves a dispute between the petitioner Company and the Central Goods & Services Tax (CGST) authorities. The petitioner Company contests a letter dated April 26, 2019, issued by respondent No. 2, as detailed in Annexure-7 of the writ application. This letter demands the petitioner to settle a shortfall in Integrated Goods and Services Tax (IGST) payment amounting to Rs. 41,98,642/-, along with accrued interest within one week. Failure to comply would result in the initiation of legal actions under the Central Goods & Services Tax Act, 2017, and related rules for recovery.

The petitioner, a company registered under the CGST Act and the IGST Act, brings this challenge. The disagreement stems from activities in September 2017, shortly after the enactment of these laws. In their GSTR-1 filing for that month, the petitioner declared a total Integrated Tax liability of Rs. 74,51,127/-, with Central Tax and State Tax liabilities each at Rs. 2,68,470/-. However, in a subsequent GSTR-3B submission, the petitioner reported a significantly reduced Integrated Tax liability of Rs. 32,52,484.58/- and an inflated Central Tax liability of Rs. 44,67,113.71/-. This discrepancy led to a deficient liability under IGST, amounting to Rs. 41,98,642.42/-.

The case revolves around a dispute stemming from a letter issued on April 26, 2019, by respondent No.2, which demanded the petitioner company to pay a shortfall in Integrated Goods and Services Tax (IGST) amounting to Rs.41,98,642/- along with interest within a week. Failure to comply would result in legal action under the Central Goods & Services Tax Act, 2017. The petitioner, a company registered under the CGST Act and IGST Act, had initially filed its tax liabilities for September 2017, showing an IGST liability of Rs.74,51,127/-. Subsequently, in its GSTR-3B, the petitioner declared a lower IGST liability of Rs.32,52,484.58/- and overpaid Central Tax. This discrepancy went unnoticed until November 2018 when the petitioner was notified of the shortfall.

The petitioner contended that the shortfall arose due to inadvertent payment of IGST under the CGST head, a mistake made during the early phase of GST implementation. The petitioner’s response to the notice clarified that the IGST amount had indeed been paid, albeit under the wrong category, and requested adjustment. However, this request was denied, and the petitioner was again asked to pay the IGST amount.

The petitioner argued that there was no actual shortfall in tax payment but rather a misclassification of the tax head, owing to the complexities of the GST regime during its initial stages. They maintained that the tax was paid on time and attributed the error to confusion regarding the nature of the transaction (intra-state vs. inter-state) while filing their returns.

In response, the respondent contended that the petitioner was aware of the nature of the transaction when filing GSTR-1 but misclassified it in GSTR-3B. They emphasized the importance of correctly classifying transactions and argued against the petitioner’s claim of inadvertent error.

In summary, the case involves a disagreement over the classification of tax payments under the GST regime, with the petitioner arguing for leniency due to genuine mistakes made during the early stages of implementation, while the respondent insists on adherence to classification norms and payment obligations as per the law.

The case involves a dispute between the petitioner company and the CGST & Central Excise department regarding a letter issued by the respondent No.2 on 26.04.2019, demanding payment of short paid IGST amounting to Rs.41,98,642/- along with due interest within a week, failing which, action under the Provisions of the Central Goods & Services Tax Act, 2017, and the Rules framed thereunder, would be initiated for recovery.

The petitioner company, registered under the provisions of the CGST Act and the IGST Act, filed its GSTR-1 for September 2017, indicating its total Integrated Tax liability at Rs.74,51,127/-. However, in its subsequent GSTR-3B filing, the Integrated Tax liability was shown as Rs.32,52,484.58/-, resulting in a deficient liability of Rs.41,98,642.42/-. Simultaneously, an excess liability of Rs.41,98,643.71/- was shown under CGST, and tax was paid accordingly. This error went unnoticed until it was brought to the petitioner’s attention in November 2018 by a letter from CERA following an audit.

The petitioner responded, clarifying that the IGST amount had indeed been paid, albeit under the CGST head due to an inadvertent error during the early phases of GST implementation. They requested adjustment of the amount under the appropriate head, which was not granted. Subsequently, they were again asked to deposit the IGST amount along with interest, leading to the current challenge.

The petitioner argues that there was no actual short payment of tax, but rather a misclassification of the payment under CGST instead of IGST due to the early stage of GST implementation. They assert that they acted in good faith and promptly responded to the error, offering to rectify it either through refund or adjustment against future liabilities.

Furthermore, the petitioner’s counsel refers to relevant provisions of the CGST Act and the IGST Act, which entitle the petitioner to a refund of wrongly paid CGST and exemption from interest on subsequently identified IGST liability if initially considered an intra-state supply but later deemed inter-state. They also highlight Rule 92 of the CGST Rules, which allows for adjustments, indicating that the petitioner is willing to comply with any directive to pay under the IGST head and seek refund or adjustment accordingly.

In summary, the petitioner contends that the demand for payment of IGST is unwarranted, as the tax was already paid albeit under the wrong head, and they are willing to rectify the error as per legal provisions and guidelines.

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