Facts of the Case

M/S Brothers Trade Links, a partnership firm engaged in distribution of cosmetics and baby products at Kollam and a registered dealer under the CGST/SGST Act, was issued a scrutiny notice in Form GST ASMT-10 for FY 2017-18, noting a mismatch of Rs.6,12,127.88 between its GSTR-1 and GSTR-3B returns and excess utilisation of Input Tax Credit. On failing to respond, Form GST DRC-01A dated 29.06.2021 was issued. The petitioner explained that an uploading error had occurred at a common Akshaya Centre, where the return data of another taxable person (GSTIN 32CCFPR0040A1ZG) was mistakenly uploaded as its own for February 2018, causing its GSTR-3B to under-report actual taxable turnover of Rs.47,03,844.53 against a mistakenly reported figure of Rs.29,940, and to claim only Rs.14,525 in ITC against an actual entitlement of Rs.6,74,585.26. The petitioner stated these errors were corrected while filing GSTR-9 and GSTR-9C. On scrutiny of the GSTR-9C figures, however, the Department found a still larger unreported outward supply of Rs.40,18,303 and issued a notice under Section 74(1) of the CGST Act, culminating in an order (Ext.P15) confirming tax of Rs.6,15,548 (SGST and CGST combined) with interest and penalty. The petitioner challenged this order and Circular No.26/26/2017-GST dated 29.12.2017 as ultra vires, also seeking permission to correct the GSTR-3B uploading mistake.

Issues Involved

  1. Whether the petitioner should be permitted to rectify the GSTR-3B uploading mistake for February 2018 notwithstanding the time restriction in Circular No.26/26/2017-GST.
  2. Whether Circular No.26/26/2017-GST, insofar as it restricts rectification of GSTR-3B, is ultra vires the CGST Act.
  3. Whether the disputed facts surrounding the return mismatch could be adjudicated in writ jurisdiction under Article 226.

Petitioner's Arguments

  • The error occurred at the initial stage of the GST regime and should have been permitted to be corrected; the time limit in Circular No.26/26/2017-GST ought not to bar rectification.
  • Relied on Deepak Print v. Union of India, Gujarat High Court, Civil Application No.18157 of 2019 (09.03.2021), where paragraph 4 of Circular No.26/26/2017-GST was read down to permit rectification of GSTR-3B for the period to which the error relates.
  • Also relied on Bharti Airtel Limited v. Union of India, Delhi High Court, W.P.(C) 6345/2018 (05.05.2020), which took a similar view.
  • Sought permission to rectify the error in the Form GSTR-3B filed for February 2018.

Respondent's Arguments

  • The petitioner could approach the appellate authority under Section 107 of the GST Act against the impugned order.
  • Once Circular No.26/26/2017-GST is read down as per the Gujarat and Delhi High Court decisions, the appellate authority would take that position of law into consideration while deciding the appeal.

Court Order/Findings

  • The Court noted that paragraph 4 of Circular No.26/26/2017-GST has been read down in several High Court judgments to permit rectification of a bona fide mistake in respect of the period to which the error relates.
  • The question of whether the mismatch arose from a genuine uploading error at the common service centre was a disputed question of fact that the Court could not decide within its jurisdiction under Article 226.
  • The writ petition was disposed of with liberty to the petitioner to approach the Appellate Authority under Section 107 against the impugned order (Ext.P15), which would examine the documents and pass an order in accordance with law, taking into account the position that the Circular has been read down by the Gujarat and Delhi High Courts.

Important Clarification

  • Circular No.26/26/2017-GST's restriction confining rectification of Form GSTR-3B to the return-filing period (rather than the period to which the error relates) has been read down by the Gujarat High Court in Deepak Print and the Delhi High Court in Bharti Airtel, and adjudicating/appellate authorities are expected to apply this position when a bona fide clerical error is demonstrated.
  • Disputed factual questions about the cause of a return mismatch are not suited to adjudication in writ jurisdiction and should be examined by the statutory appellate authority on the evidence produced.

Sections Involved

  • Section 74, CGST Act, 2017 — determination of tax not paid by reason of fraud or wilful misstatement.
  • Section 50, CGST Act, 2017 — interest on delayed payment of tax.
  • Section 107, CGST Act, 2017 — appeal to the Appellate Authority.
  • Circular No.26/26/2017-GST dated 29.12.2017 — clarification on rectification of Form GSTR-3B errors.

Decision – In Favour of

Disposed of with liberty to appeal, no finding rendered on the merits of the tax demand itself — a procedural outcome, though the Court's observation that Circular No.26/26/2017-GST has been read down by other High Courts is a factor favourable to the Assessee's case before the appellate authority.

Related Case Laws

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Case Details

Court: High Court of Kerala at Ernakulam
Case No.: WP(C) No.34049 of 2023
CNR: Not available
Coram: Dinesh Kumar Singh, J.
Decision Date: 17-10-2023
Disposal Nature: Disposed of with liberty to appeal under Section 107

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