Claiming IGST as CGST/SGST does not attract Penalty and Interest – Order remanded back for reconsideration

Citation:

Kalleppuram Metals vs. Union of India

High Court of Kerala

[2025] 171 taxmann.com 32 (Kerala)[09-12-2024]

Facts of the Case:

1. Appellate Authority has confirmed the Order passed confirming penalty and interest on cross availment of ITC.
2. For the FY 2017-18, it was alleged that the petitioner has availed CGST and SGST credits wrongly, which were actually IGST Credits. A demand of Rs.14,57,108/- along with interest of Rs.12,03,691/- and a penalty of Rs.1,45,710/- was imposed under Section 73(1) of the GST Act vide the impugned Order by the Adjudicating Authority. On an Appeal, the same were confirmed by the appellate Authority.
3. It was observed that in a recent judgment of this Court in Rejimon Padickapparambil Alex v. Union of India [2024 KHC Online 7215], on an almost similar situation, the ITC available in the electronic credit ledger should be considered as a pool of funds designated for different types of taxes, such as IGST, CGST and SGST. It was further observed that the said credit ledger represents a wallet with compartments for IGST, CGST and SGST funds and the entire wallet has to be taken into consideration, instead of individual compartments.

Findings of the Court:

1. It was concluded that Section 73 of the GST Act is attracted only when tax has not been paid or when there is a short payment or when any amount has been erroneously refunded, or where any input tax has been wrongly availed or utilised for any reason.
2. It cannot be said that there is any wrongful availment of ITC, since the GST system treats Credit Ledger as a unified source, and there cannot be any loss of revenue.
3. The mistake commited by the petitioner was at the most a technical one.

Held that:

1. The Impugned Order to the extent of imposing penalty and interest, is set aside.
2. The department is directed to reconsider the appeal in the light of the above mentioned case.