Clerical Error in GSTR-3B Cannot Deny Refund of IGST
Paid Twice on Exports: GSTAT Allows Refund to Choice Cashew Industries
Summary of
the Case
M/s Choice Cashew
Industries is engaged in the export of cashew kernels.
During November 2018,
December 2018 and February 2019, the appellant exported cashew kernels on
payment of IGST at 5%.
Although the exports and
corresponding IGST payments were correctly reported in GSTR-1, while
filing GSTR-3B the taxpayer inadvertently reported the export turnover and IGST
in Table 3.1(a) instead of Table 3.1(b).
Table 3.1(a) relates to
outward taxable supplies other than zero-rated supplies, whereas Table 3.1(b)
is meant for zero-rated supplies.
Because of this mismatch
between the shipping bills, GSTR-1 and GSTR-3B, the Customs EDI system did not
process the automatic refund of IGST.
To obtain the export
refund, the taxpayer subsequently paid the same IGST amount again in the
GSTR-3B return for August 2019 and correctly reported it under the
zero-rated supply column.
The second payment was
refunded through the Customs automated system.
However, the original
IGST payments made during November 2018, December 2018 and February 2019
remained with the Government, resulting in double payment of IGST.
The taxpayer therefore
filed refund claims for the original payments.
Amount
Involved
The IGST paid on exports
during the respective months was:
|
Period
|
IGST
Paid
|
|
November
2018
|
₹9,41,390
|
|
December
2018
|
₹4,55,293
|
|
February
2019
|
₹4,30,587
|
|
Total
|
₹18,27,270
|
The same amount was
subsequently paid again through the August 2019 GSTR-3B and was refunded
through the Customs EDI system.
Therefore, the original
payment of ₹18,27,270/- remained as excess payment of IGST.
Issue
Before GSTAT
The main issue before the
Tribunal was:
Whether refund of IGST
paid on exports can be denied merely because the taxpayer had made a clerical
error while reporting the export turnover in GSTR-3B, when the same IGST was
subsequently paid again and the second payment was refunded through the Customs
system?
The Tribunal was also
required to examine whether the Revenue could retain an amount which had
effectively been paid twice for the same export transactions.
Relevant
GST Provisions
Section 54 – Refund
Section 54 provides the
statutory framework for claiming refund of tax and other eligible amounts under
the GST law.
The dispute in the
present case concerned refund of IGST which had already been paid on export
transactions.
Zero-Rated Supply
Exports are treated as
zero-rated supplies under the GST framework.
Where exports are made on
payment of IGST, the tax paid on such exports is eligible for refund subject to
the applicable statutory conditions and prescribed procedure.
Article 265 of the
Constitution of India
The Tribunal also relied
upon the constitutional principle that:
“No tax shall be levied
or collected except by authority of law.”
The Tribunal applied this
principle to hold that an amount which was paid in excess and was not actually
payable could not simply be retained by the Revenue.
Facts of
the Case
The appellant exported
cashew kernels during November 2018, December 2018 and February 2019.
The appellant had:
- exported the goods;
- filed shipping bills with Customs;
- paid IGST at 5%;
- correctly reported the export
transactions in GSTR-1; and
- paid the corresponding IGST.
However, while filing
GSTR-3B, the export turnover was inadvertently reported in Table 3.1(a)
instead of Table 3.1(b).
Because of this mismatch,
the Customs EDI system did not process the automatic refund.
The appellant then paid
the same IGST amount again in the August 2019 GSTR-3B and correctly reported
the export turnover under Table 3.1(b).
The second payment was
automatically refunded through the Customs system.
Consequently, the first
payment remained with the Government even though the tax liability relating to
those exports had already been discharged and the same amount had subsequently
been paid again.
Rejection
by the Department
The taxpayer filed refund
claims for the original IGST payments.
The refund claims were
rejected through separate orders:
- ₹9,41,390/- for November 2018;
- ₹4,55,293/- for December 2018; and
- ₹4,30,587/- for February 2019.
The taxpayer challenged
the rejection before the first appellate authority.
However, the appeals were
dismissed primarily on the ground that the taxpayer had already received
refund.
The taxpayer thereafter
approached GSTAT.
Submission
of the Appellant
The appellant submitted
that the refund received through the Customs EDI system related only to the second
payment of IGST made in August 2019.
It was not a refund of
the original IGST payments made in November 2018, December 2018 and February
2019.
Therefore, the taxpayer
argued that the original payments continued to remain with the Government and
represented excess payment of IGST.
The appellant further
explained that the mistake in GSTR-3B was only a reporting error. The export
transactions themselves were genuine and were correctly reflected in GSTR-1 and
the shipping bills.
The appellant therefore
requested refund of the original IGST payments.
Submission
of the Revenue
The Revenue explained
that the export turnover and IGST were initially reported in the wrong column
of GSTR-3B.
According to the Revenue,
because the IGST payment was reported in Table 3.1(a) instead of Table 3.1(b),
the Customs system did not process the automatic refund.
The taxpayer subsequently
paid the same amount again in August 2019 and correctly reported it in Table
3.1(b), following which the second payment was refunded.
The Revenue submitted
that the taxpayer was required to establish through reconciliation and
supporting documents that the amount claimed as refund was actually the first
IGST payment, and that the amount already refunded through Customs
represented the subsequent payment.
Findings of
GSTAT
A. Authorities Failed to
Properly Examine the Two Separate Payments
GSTAT observed that both
the original adjudicating authority and the first appellate authority had
failed to properly understand the distinction between:
1. the
IGST paid during November 2018, December 2018 and February 2019; and
2. the
same amount paid again in August 2019 and subsequently refunded through the
Customs automated system.
The Tribunal examined the
GSTR-1, GSTR-3B returns, reconciliation statements and other records and found
that the taxpayer had indeed made two separate payments.
B. Export Details Were
Correctly Reported in GSTR-1
The Tribunal noted that
the export figures and corresponding IGST liability were correctly reflected in
the taxpayer's GSTR-1 returns.
The error occurred while
filing GSTR-3B, where the export turnover was reported in Table 3.1(a) instead
of Table 3.1(b).
The Tribunal explained
the distinction between the two columns:
Table 3.1(a):
Outward taxable supplies other than zero-rated, nil-rated and exempt supplies.
Table 3.1(b):
Outward taxable supplies which are zero-rated.
Thus, according to the
Tribunal, the error was essentially a matter of placing the export figures in
the wrong column.
Double
Payment of IGST Was Established
After examining the
returns, GSTAT found that IGST had been paid:
- once during the respective months of
export; and
- again in August 2019.
The amount paid in August
2019 was refunded through the Customs automated refund mechanism.
However, the amounts paid
during November 2018, December 2018 and February 2019 remained with the
Government.
Therefore, the original
payments constituted excess payment of IGST.
The Tribunal also
observed that the Revenue had not brought any evidence to establish why the
original amount should not be treated as excess payment when the same amount
had been paid again in August 2019.
Clerical
Error Cannot Become a Ground for Retaining Excess Tax
One of the important
observations of the Tribunal was that the taxpayer had committed only a clerical
error while filing GSTR-3B.
The export turnover was
entered in the wrong column, but the transaction itself was not disputed.
The taxpayer had also
subsequently explained the error through reconciliation.
GSTAT held that such a
minor clerical mistake could not justify retention of an amount which had
effectively been deposited twice with the Government.
The Tribunal specifically
observed that the taxpayer could not be penalised by denial of refund merely
because correct entries had been made at the wrong place.
Principle
of Article 265 of the Constitution
GSTAT further relied upon
the principle that tax cannot be collected or retained without authority of
law.
The Tribunal observed
that once it was established that the amount had been paid in excess, the
Revenue could not retain the amount merely because the taxpayer had made a
procedural or clerical mistake while filing the return.
The Tribunal supported
its view by referring to the decision of the Orissa High Court in Rajendra
Narayan Mohanty v. Joint Commissioner of State Tax, Cuttack.
In that case, the High
Court considered the constitutional limitation under Article 265 in the context
of excess tax payment and refund.
Reliance on
Karnataka High Court Decision
GSTAT also referred to
the Karnataka High Court decision in Merck Life Science Private Limited v.
Union of India.
The Tribunal noted the
principle discussed in that decision concerning tax paid due to oversight,
inadvertence or error and the statutory mechanism for refund of such amounts.
The Tribunal also
referred to the principle that where excess payment is not disputed, the
Revenue cannot retain the amount merely by relying on procedural
considerations.
Final
Decision of GSTAT
After considering the
records and submissions, GSTAT held that the appellant was entitled to refund
of the excess IGST paid.
The Tribunal concluded
that:
- the wrong reporting in GSTR-3B was a clerical
mistake;
- the export transactions were genuine;
- the IGST had actually been paid;
- the same amount was subsequently paid
again;
- the second payment was refunded
through the Customs automated system;
- the original payment therefore
remained as excess payment; and
- the refund could not be denied merely
because of the clerical mistake in the GST return.
Accordingly, GSTAT:
quashed and set aside the
Order-in-Appeal dated 31 October 2022 and allowed Appeal Nos. APL/6/TVP/2026,
APL/8/TVP/2026 and APL/9/TVP/2026 with consequential relief.
Conclusion
The decision in Choice
Cashew Industries highlights an important principle in GST refund matters.
A genuine clerical
mistake in a GST return should not result in the Government retaining tax that
has demonstrably been paid in excess.
In the present case, the
taxpayer had correctly exported the goods and paid IGST. Due to an incorrect
reporting entry in GSTR-3B, the automatic Customs refund mechanism did not
process the first payment. The taxpayer therefore paid the same IGST again, and
the second payment was refunded.
Once the records
established that the original amount remained with the Government as an excess
payment, GSTAT held that the amount could not be retained merely because of the
reporting error.
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