HC directs GST authorities to permit rectification of GSTR-1 online or manually [Read Order]

The Bombay High Court in the matter Star Engineers (I) Pvt. Ltd. Vs. Deputy Commissioner of State Tax-GST directs ST authorities to permit rectification of GSTR-1 online or manually.

This petition under Article 226 of the Constitution of India essentially challenges a communication dated 27 September 2023 issued by the respondent-Deputy Commissioner, State Tax, whereby on an application of the petitioner for seeking approval to modify / amend FORM GSTR-1 for financial year 2021-2022 dated 11 September 2023, the petitioner has been informed that such a request for amendment of Form GSTR-1 cannot be approved considering that the matter is time barred and accordingly, the petitioner’s application would stand rejected.

The petitioner is engaged in designing, developing, manufacturing and supplying wide range of electronic components for industrial purpose. It is the petitioner’s case that it is a regular supplier to Bajaj Auto Limited (BAL) and delivers its products based on varying delivery terms as specified in the purchase orders received from BAL.

The petitioner contends that during the financial year 2021-2022 the petitioner had carried out delivery of the goods to several third-party vendors and simultaneously invoices were generated “Bill-to-Ship-to-Model” in line with the instructions received from BAL. During the said period, the company had correctly issued the e-invoices and credit notes in favour of BAL by appropriately citing its GST identification number (“GSTIN”). However, at the time of filing of Form GSTR-1 for the period July 2021, November 2021 and January 2022, inadvertently GSTIN of third parties to whom shipment was delivered, was reported instead of declaring GSTIN of BAL.

The petitioner contends that BAL was made aware of such error, post the due date of correction in Form GSTIN-1 for the financial year 2021-22 by one of the vendors to whom the goods were shipped, as the transaction was notified in Form GSTR-2B. In pursuance thereto, the petitioner tried to rectify the invoices in question to address the error, however, as the mistake came to the notice of the petitioner in the month of November 2022, GST Portal did not allow any modification in Form GSTR-1 pertaining to the period of July 2021, November 2021 and January 2022.

In such circumstances, the invoices submitted by the petitioner did not appear in BAL’s Form GSTR-2B but instead inadvertently appeared in vendor’s Form GSTR-2B. Resultantly, BAL was unable to claim Input Tax Credit (“ITC”) for those invoices and consequently at the time of processing the payment of the petitioner for the month of March 2023, BAL reduced the amount equivalent to the GST amount, interalia stating that BAL had not claimed the said invoices for ITC as same were not appearing in Form GSTR-2B, as GSTIN of a third party was given instead of BAL. Consequently BAL debited the mismatched amount to the petitioner’s account.

It is in such circumstances, the petitioner approached the Deputy Commissioner of State Tax by its letter dated 11 September 2023 interalia contending that the petitioner has fulfilled its tax obligation in relation to the supplies made to BAL during the financial year 2021-22, which indicated that all the required taxes associated with the transactions involving BAL have been appropriately and duly paid by the petitioner to the Government and that the petitioner had also complied all GST Regulations. It was contended that post identification of the inadvertent error made during filing of Form GSTR-1, petitioner has taken proactive steps and secured confirmation from the respective third party companies, confirming the non-availment of ITC at their end. Accordingly, it was contended that what had occurred was merely a procedural error at the petitioner’s end and in fact, the petitioner is suffering a double prejudice as though the petitioner had deposited GST with the Government, the credit of payment is held up for want of reflection of the ITC in Form GSTR-2B, which is causing serious financial hardship to the petitioner. The petitioner therefore, requested the said officer that the petitioner be allowed to rectify Form GSTR-1 to correctly reflect the particulars which will resolve the whole issue. In support of such submission, the petitioner relied on various decisions of the High Court which were supporting petitioner’s request for such rectification being permitted. The petitioner’s request, however, was rejected by the impugned order as noted by us above. It is in these circumstances, the petitioner has filed the present petition assailing such order passed by the Deputy Commissioner.

Applying such principles to the facts of the present case, in our opinion, the State Tax Officer had all materials before it which went to show that there was nothing illegal and / or that what had happened at the end of the petitioner was that the invoices generated by the petitioner under the bill-to-ship-to-model for delivery of goods to third party vendors of BAL of which input tax credit for the invoices in question, were not availed by BAL due to error of credit not being reflected in the GSTR-1, as the petitioner had mentioned GSTIN of third party instead of GSTIN of BAL. This is also accepted by the State Tax Officer in the impugned communication.

As a result of the above discussion, in our opinion, the State Tax officer ought to have granted the petitioner’s request to rectify / amend the Form GSTR–1 for the period July 2021, November 2021 and January 2022, either through Online or manual means.

We also find that the petitioner’s reliance on the decision as noted by us is quite apposite. In Sun Dye Chem Vs. Assistant Commissioner (supra), learned Single Judge of the Madras High Court considered a similar case wherein an error was committed by the petitioner in filing of details relating to credit. The error was to the effect that what should have figured in the CGST/SGST column was inadvertently reflected in the IGST column. It was not the case of the department that the error was deliberate and was intended to gain any undue benefit by the petitioner and in fact, by reason of the error, the customers of the petitioner were denied credit which they claim to be legitimately entitled to. It was also an error which was not initially noted by the petitioner, and on account of the error, the customers of the petitioner would be denied credit which they claimed to be legitimately entitled to, owing to the fact that the credit stands reflected in the wrong column. It is in these circumstances, after examining the relevant provisions which we have already discussed, the learned Single Judge observed that in the absence of an enabling mechanism, the assessee should not be prejudiced from availing credit which they are otherwise legitimately entitled to. The Court observed that an error committed by the petitioner is an inadvertent human error and the petitioner should not be prevented from rectifying the same and accordingly, allowed the petition.

A similar view was taken in the Pentacle Plant Machineries Pvt. Ltd. (supra) which also followed the decision in Sun Dye Chem (supra).

We also note that the Division Bench of the Orissa High Court in Shiva Jyoti Construction (supra) was considering the case wherein the petitioner had prayed for a relief that the petitioner be permitted to rectify the GST returns filed in September 2017 and March 2018 which was filed inadvertently in Form-B2B instead of Form B2C as was wrongly filed under the GSTR-1 in order to get input tax credit benefit by a third party namely M/s. Odisha Construction Corporation Ltd. The last date for filing of return was 31 March 2019 and the rectification should have been carried out by 13 April 2019. The petitioner contended that an error came to be noticed after the said third party held up the running bill amount of the petitioner by informing it of the error on 21 January 2020. The petitioner contended that thereafter it was making a request to the department to correct the GSTR-1 form, but it was not allowed. It is in these circumstances, the Court considering the fact that in permitting the petitioner to rectify such error, there was no loss of revenue whatsoever to the department, that it was only about the ITC benefit which was to be given to the customer of the petitioner, failing which a prejudice would be caused to the petitioner. The Division Bench referring to the decision in Sun Dye Chem (supra) granted the prayer of the petitioner for setting aside the letter of rejection as impugned in the proceedings and permitting the petitioner to resubmit the corrected returns in Form – B2B under GSTR-1 for the period in question.

The Division Bench of the Jharkhand High Court in Mahalaxmi Infra Contract Ltd. (supra) has taken a similar view wherein the Division Bench after considering the rival contentions and the scheme of the legislation, allowed the petition considering the fact that there was no loss of revenue, if such rectification as prayed for by the petitioner was to be granted.

On the interpretation of the provisions as made by us and the common thread running through the decisions as noted above, it would lead us to observe that the GST regime as contemplated under the GST Law unlike the prior regime, has evolved a scheme which is largely based on the electronic domain.

The diversity, in which the traders and the assessees in our country function, with the limited expertise and resources they would have, cannot be overlooked, in the expectation the present regime would have in the traders / assessees complying with the provisions of the GST Laws. There are likely to be inadvertent and bonafide human errors, in the assessees adopting themselves to the new regime. For a system to be understood and operate perfectly, it certainly takes some time. The provisions of law are required to be alive to such considerations and it is for such purpose the substantive provisions of sub-section (3) of Section 37 and sub-section (9) of Section 39 minus the proviso, have permitted rectification of inadvertent errors.

We may also observe that the situation like in the present case, was also the situation in the proceedings before the different High Courts as noted by us above, wherein the errors of the assessee were inadvertent and bonafide. There was not an iota of an illegal gain being derived by the assessees. In fact, the scheme of the GST laws itself would contemplate correct data to be available in each and every return of tax, being filed by the assessees. Any incorrect particulars on the varied aspects touching the GST returns would have serious cascading effect, prejudicial not only to the assessee, but also to the third parties.

It is considering such object and the ground realities, the law would be required to be interpreted and applied by the Department. This necessarily would mean, that a bonafide, inadvertent error in furnishing details in a GST return needs to be recognized, and permitted to be corrected by the department, when in such cases the department is aware that there is no loss of revenue to the Government. Such freeplay in the joint requires an eminent recognition. The department needs to avoid unwarranted litigation on such issues, and make the system more assessee friendly. Such approach would also foster the interest of revenue in the collection of taxes.

ORDER

(I) The respondents are directed to permit the petitioner to amend / rectify the Form GSTR-1 for the period July 2021, November 2021 and January 2022, either through Online or manual means within a period of four weeks from today.

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