No, the Hon’ble Kerala High Court in M/s Golden Traders v. Assistant State Tax Officer & Ors. [2025 TAXONATION 1455 (KERALA)] held that when the discrepancy pertains to availment of input tax credit under incorrect tax heads without any loss to the revenue, the same does not warrant proceedings under Section 73 of the CGST Act, and such cases must be viewed as procedural lapses, not fraudulent availment of credit. The petitioner, a registered partnership firm engaged in trading of plastic moulded chairs and watches, challenged a demand order issued under Section 73 for FY 2017–18, alleging excess availment of ITC amounting to Rs 1,29,906. The petitioner contended that the alleged discrepancy stemmed merely from a technical error in crediting CGST and SGST instead of IGST. Despite filing an appeal under Section 107, the same was dismissed. Relying on the Kerala High Court's earlier Division Bench decision in Rejimon Padickapparambil Alex v. Union of India [2024 TAXONATION 3238 (KERALA)], the petitioner argued that such errors, where there is no revenue loss, cannot be penalized under Section 73. The Hon’ble Court concurred, reiterating that the electronic credit ledger functions as a wallet with multiple tax compartments and that such technical misclassification should not attract penal provisions when the ITC is otherwise eligible and used for discharging output liability. Accordingly, the impugned orders were quashed and the matter remanded for reconsideration by the assessing officer, who was directed to decide the matter afresh within three months, in line with the principles laid down in the Rejimon case.
Author’s Comments
The doctrine of moulding relief grants Courts of Equity, such as the Supreme
Court and High Courts, the authority to go beyond statutory limitations and
devise equitable solutions to address grievances. The present case exemplifies the exercise of such discretionary power. A significant and growing concern for the Revenue in litigation before courts of equity is the persistent failure of Departmental counsel to present arguments based on the newly enacted GST legislation. As GST is a relatively recent statute, legislation must not be overlooked. However, departmental representatives often rely on precedents from the pre-GST era rather than engaging with the nuances of the current statutory framework. In this case, the petitioner advanced the argument of Revenue Neutrality—a concept that briefly emerged under GST but lost relevance over time. If such an argument were to be accepted, it would render the law ineffective, as virtually every legal dispute could then be framed as revenue-neutral. This would undermine the very foundation of new legislation.
Furthermore, the petitioner admitted to making an incorrect ITC claim,
regardless of the underlying reasons. Such an admission is conclusive and leaves no room for further debate. The Proper Officer lacks the authority to entertain pleas seeking relief based on such arguments, irrespective of their persuasiveness. The statutory framework must be upheld, ensuring that legal interpretations align with the legislative intent and do not dilute the effectiveness of GST enforcement.
GST Case Law Golden Traders v. Assistant State Tax Officer & Ors.
Citation-2025 TAXONATION 1455 (KERALA)
CA Ritesh Arora
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