GST Case 6- Saji s. v. Commissioner, State GST Department

GST Case6- Saji s. v. Commissioner, State GST Department

In GST Case of Saji s. v. Commissioner, the state GST Department, the demand of the IGST is adjusted with the refund of the SGST of the applicant. 

Facts of the Case:

The goods in transit were detained by the Assistant State Tax Officer (ASTO) while in transit. Demand Notice was issued to the appellant and based on the demand notice tax and penalty were deposited. However, the deposit was made under ‘SGST’ instead of “IGST”.

Submission:

The petitioner’s counsel contended that statute empowers authorities to transfer the deposit from one head to another: from SGST to IGST vide Rule 4(1) of the GST Refund Rules, 2017. However, revenue contended that petitioner could pay the amount under ‘IGST’ and claim a refund of ‘SGST’ as per Section 77. If authorities go for an adjustment, it will take more than a couple of months.

Held:

Hon’ble Kerala High Court held that officials should allow petitioner’s request and get the amount transferred from ‘SGST’ to ‘IGST’. Revenue contended that adjustment would take some time but Hon’ble Court held that petitioner cannot suffer on that count.

Comment:

The judgment is a beneficial judgment for the assessee. However following things requires a thought for the future:

a) The Judgement refers to Rule 4(1) of Refund Rules. However, in my view, it should be read as Rule 92(1) of Kerala Goods and Services Tax Rules, 2017 (hereinafter referred as KGST Rules, 2017).

b) Rule 92(1) of the KGST Rules, 2017 (since the refund amount is under KGST Rules, 2017, therefore, Rule 92(1) of KGST Rules, 2017 has been referred) allows adjustment of refund only against outstanding demand under Ordinance or under any existing law. The two key words here are “under Ordinance” and “under existing law”. The word “Ordinance” would mean KGST Ordinance, 2017 and “existing law” would mean any law, notification, order, rule or regulation relating to levy and collection of duty or tax on goods or services or both passed or made before the commencement of this Act by the Legislature or any Authority or person having the power to make such law, notification, order, rule or regulation.

Therefore, Refund under KGST Act, 2017 could only be adjusted against demand under the KGST Act, 2017 or existing laws. Part A of Form GST RFD-07 also specifically provides as follows: “Refund adjusted against outstanding demand (as per order no.) under existing law or under this law. Demand Order No…… date……”.Therefore, Rules do not contemplate adjustment of demand under the IGST Act against refund under SGST Act since the demand under IGST Act is neither under “Ordinance” and nor under “existing law”. Therefore applicability of Rule 92(1) may need to be re-ascertained.

c) The adjustment referred in Rule 92(1) of KGST Rules, has been empowered through the provisions of section 54(10) of KGST Act, 2017 which provides power to the proper officer to deduct from the refund due, any tax, interest, penalty, fee or any other amount which the taxable person is liable to pay but that too which remains unpaid under KGST Act, 2017 or under the existing law.

d) Section 77 only covers cases wherein Central tax and State tax has been paid on transaction considering the transaction to be an intra-State supply, but which is subsequently held to be an inter-State supply. The given case is not a case wherein supply has been considered as intrastate supply and subsequently, it is considered as inter-state supply. The given case is the deposit of tax in the incorrect ledger. Therefore, the applicability of section 77 also needs to be re-ascertained.

Thus, the benefit of the judgment needs to be taken with a bit of caution and prone to challenge in the coming times as the legal provisions for adjustment were not challenged before the High Court and only thing pleaded by the counsel of the revenue was Section 77 and time taken to adjust the outstanding refund in SGST against IGST.