Shree Nanak Ferro Alloys Pvt Ltd VS Union Of India

The petitioner, a company registered under the CGST Act and the IGST Act, challenges a letter dated 26.04.2019, issued by respondent No.2 (referred to as the respondent), demanding payment of short-paid IGST amounting to Rs.41,98,642, plus interest. The dispute arises from the petitioner’s filings in September 2017, shortly after the enactment of the CGST and IGST Acts. Initially, the petitioner reported its liabilities in GSTR-1 as IGST Rs.74,51,127, Central Tax Rs.2,68,470, and State Tax Rs.2,68,470. However, in subsequent filings of GSTR-3B, the IGST liability was reduced to Rs.32,52,484.58, and Central Tax liability increased to Rs.44,67,113.71. This resulted in a shortfall in IGST liability of Rs.41,98,642.42, prompting the demand for payment from the respondent.

However, it was discovered later that there was an excess payment of CGST amounting to Rs.41,98,643.71, which went unnoticed for about a year. Subsequently, in a letter dated 01.11.2018, the petitioner was informed of the shortfall in IGST payment during an audit by CERA. The petitioner responded on 19.11.2018, explaining that the IGST amount was inadvertently paid under the CGST head, and requested adjustment of the amount. They argued that it was a genuine mistake due to the early phase of GST implementation.

The petitioner’s plea for adjustment was not accepted, and they were again asked to deposit the IGST amount along with interest in the letter dated 26.04.2019, which is the subject of the writ application.

The petitioner contends that there was no actual short payment of tax, but rather a misclassification of the payment under CGST instead of IGST. They argue that the payment was made on time and was a bona fide mistake. The petitioner explains that they erroneously classified the transaction as an intra-state supply in their GSTR-3B, while it was actually an inter-state supply.

The respondent, in their detailed reply dated 19.11.2018 (Annexure-6), stated that the petitioner was aware of the nature of the supply being inter-state while filing GSTR-1 but misclassified it in GSTR-3B. The respondent maintains their stance that the petitioner must pay the outstanding IGST amount.

In summary, the petitioner seeks relief from the demand for payment of short-paid IGST, arguing it was a genuine mistake made during the early stages of GST implementation, and requests adjustment of the excess CGST payment. Conversely, the respondent asserts that the petitioner must fulfill their IGST liability as per the law.

The petitioner, after initially making what they believed to be correct tax payments under the CGST Act, later discovered an excess payment of CGST amounting to Rs.41,98,643.71, which had gone unnoticed for about a year. Upon being notified of a shortfall in IGST payment during an audit by CERA in a letter dated 01.11.2018, the petitioner explained that the IGST amount was mistakenly paid under the CGST head due to a genuine error during the early phase of GST implementation. They requested an adjustment of the amount to rectify the error. However, their plea for adjustment was rejected, and they were asked to deposit the IGST amount along with interest in a subsequent letter dated 26.04.2019, leading to the initiation of the writ application.

The petitioner argues that there was no actual short payment of tax, but rather a misclassification of the payment under CGST instead of IGST. They assert that the payment was made on time and was a bona fide mistake, attributing the error to the complexities of the early GST implementation phase. They clarify that they erroneously classified the transaction as an intra-state supply in their GSTR-3B, when it was, in fact, an inter-state supply.

In response, the respondent, in their detailed reply dated 19.11.2018 (Annexure-6), contended that the petitioner was aware of the inter-state nature of the supply while filing GSTR-1 but mistakenly misclassified it in GSTR-3B. Despite this, the respondent insists that the petitioner must fulfill their IGST liability as per the law.

In essence, the petitioner seeks relief from the demand for payment of the short-paid IGST, arguing it was an inadvertent mistake made during the initial stages of GST implementation. They request an adjustment of the excess CGST payment. Conversely, the respondent maintains that the petitioner is obligated to fulfill their IGST liability according to the law.

The petitioner, initially believing their tax payments were correct under the CGST Act, later discovered an excess payment of CGST. They claimed this was due to mistakenly paying the IGST amount under the CGST head during the early phase of GST implementation. Despite their request for adjustment of this amount, their plea was rejected, and they were asked to deposit the IGST along with interest. The petitioner argues that this was not a case of actual short payment but a misclassification error, and they made the payment on time. They attribute this mistake to the complexities of the GST implementation phase. The petitioner asserts that they erroneously classified the transaction as intra-state in their GSTR-3B when it was actually inter-state.

In response, the respondent contends that the petitioner was aware of the inter-state nature of the supply when filing GSTR-1 but misclassified it in GSTR-3B. Despite this contention, the respondent insists on the petitioner fulfilling their IGST liability.

The petitioner seeks relief from the demand for payment of short-paid IGST and requests an adjustment of the excess CGST payment. However, the respondent maintains that the petitioner must fulfill their IGST liability as per the law.

Additionally, the petitioner’s counsel argues that no interest is payable by the petitioner company. On the other hand, counsel for the CGST opposes the petitioner’s prayer, pointing out that the petitioner correctly filed GSTR-1 indicating inter-state supply, suggesting an intentional misclassification in GSTR-3B. They further argue that there is no provision for the transfer or adjustment of paid tax between different tax heads and cite constitutional and statutory provisions to support their argument.

Download PDF:

For Reference Visit:

Read Another Case Law:

GST Case Law