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GST Judgement Update

The Hon’ble SC in the case of Bharti Airtel held that assessee cannot be permitted to unilaterally carry out rectification of his returns submitted electronically in Form GSTR 3B, which inevitably would affect the obligations and liabilities of other stakeholders, because of the cascading effect in their electronic records.

  1. UOI vs. Bharti Airtel Ltd. [TS-555-SC-2021-GST] : Disallowing Bharti Airtel from seeking Rs. 923 Cr GST refund by rectifying return

The Hon’ble SC held that assessee cannot be permitted to unilaterally carry out rectification of his returns submitted electronically in Form GSTR 3B, which inevitably would affect the obligations and liabilities of other stakeholders, because of the cascading effect in their electronic records. Therefore, the challenge to the impugned Circular No. 26/26/2017 GST was found unsustainable and impugned judgment of Hon’ble HC was set aside in Revenue’s favour.

Facts of the Case :

  • In the present case assesse discharges its Output tax liability by depositing in cash for the period of July to September 2017. However, after the introduction of common electronic portal, it had several deficiencies in the auto populated data as predicated in Sections 37 and 38. Thus, the registered persons were required to submit returns in Form GSTR 3B. After Form GSTR 2A became operational in September 2018, the assessee realized that it had sufficient amount in the ITC ledger account during the relevant period

  • Further assesse contended that if form GSTR 2A been functional, there would have been no need for assesseee to pay the amount in cash, but could have utilized the ECL for payment of liability Thus, assessee urged that it be allowed to rectify Form GSTR 3B, so as to avail ITC for the relevant period in terms of Circular No.7/7/2017 GST dated 01.09.2017 so that the amount paid by it in cash towards the outward liability would get credited to its ECL account.

  • Earlier the Hon’ble HC finds that due to non- operability of Form GSTR 2A it had resulted in payment of double tax and unfair advantage to the tax authorities because of their failure to operationalize the statutory forms enabling auto- populating statement of inward supplies of the recipient and outward supplies including facility of matching and correcting the discrepancies electronically. Thus, the Hon’ble HC allowed the rectification and claim GST refund of Rs. 923 crores.

Observations by the Hon’ble SC:

  • The Hon’ble SC Finds that the Hon’ble HC did not enquire into the cardinal question as to whether the writ petitioner was required to be fully or wholly dependent on the auto generated information in the electronic common platform for discharging its obligation to pay OTL for the relevant period. Further states that the assessee was under a legal obligation to maintain books of accounts and records…during the pre-GST regime and it is the same pattern which had to be followed by the registered person in the post GST regime.

  • The Hon’ble SC also states that registered person is obliged to do self-assessment of ITC on the basis of his office record and books of accounts and it he could do even without the common electronic portal as was being done in pre-GST regime. The position is no different in the post GST regime, both in the matter of doing self-assessment and regarding dealing with eligibility to ITC and OTL.

  • Further, observed that assessee is not denied of the opportunity to rectify omission or incorrect particulars, which he could do in the return to be furnished for the month in which such omission or incorrect particulars are noticed. Thus, it is not a case of denial of availment of ITC as such rather it is postponement of ITC, which can be availed in the subsequent returns including the next financial year. It’s a matter of choice that despite the availability of funds in the electronic credit ledger, the registered person opts to discharge outward liability by paying cash.

Decision by the Hon’ble SC:

  • The Hon’ble SC states that despite such an express mechanism provided by Section 39(9) read with Rule 61 the Hon’ble HC can’t proceed on the assumption that the only way that can enable the assessee to enjoy the benefit of the utilization of the input tax credit is by way of rectification of its return submitted in Form GSTR 3B for the relevant period in which the error had occurred.

  • The Hon’ble SC held that “Resultantly, assessee cannot be permitted to unilaterally carry out rectification of his returns submitted electronically in Form GSTR 3B, which inevitably would affect the obligations and liabilities of other stakeholders, because of the cascading effect in their electronic records.”

 

Impact on the industry:

  • The Supreme court has interpreted the GST Law very strictly which will have a huge financial impact to many industries even this may cause suffer to taxpayers who are also facing the similar issues and filed different petitions in the court. From Now on, taxpayers must be extra cautious while filing their GST returns as by this ruling of court, they will not be able to claim any refund of ITC in case of any erroneous filing. Further, any pending ruling in any court relating to refund instances like these will be rejected.

 

 

 

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