Apex Court declines Bharti Airtel’s claim for refund of excess input tax credit paid to tune of Rs 923 crores; says option for discharge of output tax liability either by cash or by availing ITC once exercised, can’t be reversed

Read Judgment: Union of India vs. Bharti Airtel Ltd. & Ors

Pankaj Bajpai

New Delhi, October 29, 2021: The Supreme Court has held that express provision in the form of Section 39(9) of Central Goods and Services Tax Act, 2017 clearly posits that omission or incorrect particulars furnished in the return in Form GSTR­3B can be corrected in the return to be furnished in the month or quarter during which such omission or incorrect particulars are noticed.

Therefore, the question of reading down paragraph 4 of the GST Circular No. 26/26/2017-GST dated December 29, 2017 would have arisen only if the same was to be in conflict with the express provision in the 2017 Act and the Rules framed thereunder.

A Division Bench of Justice A. M Khanwilkar & Justice Dinesh Maheshwari observed that if there is no provision regarding refund of surplus or excess ITC in the electronic credit ledger, it does not follow that the assessee concerned who has discharged Output Tax liability [OTL] by paying cash (which he is free to pay in cash in spite of the surplus or excess electronic credit ledger account), can later on ask for swapping of the entries, so as to show the corresponding OTL amount in the electronic cash ledger from where he can take refund. 

Payment for discharge of OTL by cash or by way of availing of Input tax credit [ITC], is a matter of option, which having been exercised by the assessee, cannot be reversed unless the Act and the Rules permit such reversal or swapping of the entries, added the Bench.

Going by the background of the case, Bharti Airtel (Respondent) had alleged that there has been excess payment of taxes, by way of cash, to the tune of approximately Rs.923 crores and that this was occasioned to a great degree due to non-operationalization of Forms GSTR-2A, GSTR-2 and GSTR-3 and the system related checks which could have forewarned the Respondent about the mistake. 

It was alleged that since there were no checks on the Form GSTR-3B which was manually filled up by the Respondent, the excess payment of tax went unnoticed and when the Respondent desired to correct its returns, it was prevented from doing so as there was no enabling statutory procedure implemented by the Government. 

When the matter reached Delhi High Court, it was held that since the Respondents could not operationalize the statutory forms envisaged under the GST Act resulting in depriving the Respondent to accurately reconcile its input tax credit, the Revenue Department (Petitioner) cannot today deprive the Respondent of the benefits that would have accrued in its favour, if such forms would have been enforced. 

It was also held by the High Court that Paragraph 4 of CBIC Circular 26/26/2017-GST is not in consonance with the provisions of the CGST Act, 2017 and there was no cogent reasoning behind the logic for restricting rectification only in the period in which the error is noticed and corrected and not in the period to which it relates. 

Hence, present appeal. 

After considering the arguments, the Division Bench of the Apex Court found that the entire edifice of the grievance of the Respondent was founded on non operability of Form GSTR­2A during the relevant period, which plea having been rejected as untenable and flimsy, it must follow that the Respondent with full knowledge and information derived from its books of accounts and records, had done self assessment and assessed the OTL for the relevant period and chose to discharge the same by paying cash. 

Having so opted, it is not open to the respondent to now resile from the legal option already exercised, added the Court.

The Division Bench went on to highlight that Form GSTR­2A is only a facilitator for taking an informed decision while doing such self assessment, and non­performance or non operability of Form GSTR­-2A or for that matter, other forms, will be of no avail because the dispensation stipulated at the relevant time obliged the registered person to submit returns on the basis of such self­-assessment in Form GSTR­3B manually on electronic platform.

Registered person 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 or quarter in which such omission or incorrect particulars are noticed, added the Bench.

The Apex Court observed that the present is not a case of denial of availment of ITC as such and the ITC amount remains intact in the electronic credit ledger, which can be availed in the subsequent returns including the next financial year. 

Further, there is no express provision permitting swapping of entries effected in the electronic cash ledger vis­a-vis the electronic credit ledger or vice versa, added the Court.

The Top Court made it clear that any indulgence shown contrary to the statutory mandate would not only be an illegality but in reality, would simply lead to chaotic situation and collapse of tax administration of Union, States and Union Territories. 

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, added the Court.

Speaking for the Bench, Justice Khanwilkar opined that matching and correction process happens on its own as per the mechanism specified in Sections 37 and 38, after which Form GSTR­3 is generated for the purposes of submission of returns, and once it is submitted, any changes thereto may have cascading effect. 

Therefore, the law permits rectification of errors and omissions only at the initial stages of Forms GSTR­1 and GSTR-3, but in the specified manner.

Accordingly, the Apex Court concluded that the direction issued by the High Court, being in the nature of issuing writ of mandamus to allow the taxpayer to rectify Form GSTR­3B for the period of July to September 2017, in the teeth of express statutory dispensation, cannot be sustained.