Wrong Availment of ITC – Assessment Order Set Aside by Kerala HC

Case Title: Star Roofs and Metals v. Assistant Commissioner & Ors.
Court: High Court of Kerala at Ernakulam
Petition No.: WP(C) No. 44100 of 2024
Date of Judgment: 11 December 2024
Category: Input Tax Credit – Wrong Utilisation of IGST Credit
Relevant Sections: Section 73, CGST Act, 2017 & SGST Act, 2017; Article 226, Constitution of India
Citation: 2024:KER:93758

Facts of the Case

1. The petitioner, Star Roofs and Metals, challenged an assessment order dated 23.12.2023 (AY 2017–18), whereby a demand of ₹19,94,818/- was raised for alleged excess utilisation of ITC under Section 73 of the CGST and SGST Acts (Para 1).

2. The department alleged that ITC available under IGST was wrongly utilised under CGST and SGST heads (Para 3).

3. The petitioner had already filed an appeal before the Appellate Authority on 22.03.2024, but it remained pending even after eight months (Para 1).

Question(s) in Consideration

1. Whether utilisation of IGST credit under CGST and SGST heads amounts to wrong availment of ITC under Section 73? (Para 2–3)

2. Whether the assessment order dated 23.12.2023 was sustainable in law in view of the principle laid down in Rejimon Padickapparambil Alex v. Union of India [2024 KHC Online 7215]? (Para 2–4)

Observations of the Court

1. The Court reiterated its earlier view in Rejimon Padickapparambil Alex that the electronic credit ledger functions like a wallet with different compartments for IGST, CGST, and SGST, and mere utilisation of IGST credit under CGST/SGST does not constitute a wrong availment (Para 2).

2. Since the only allegation was utilisation of IGST ITC under other heads, no penalty or liability could be imposed (Para 3).

3. Despite an appeal being filed, continuing such proceedings would be unnecessary; hence, the Court exercised its jurisdiction under Article 226 to set aside the order and direct reconsideration (Para 3–4).

Judgment of the Court

1. The assessment order dated 23.12.2023 was set aside (Para 4).

2. The proper officer was directed to reconsider the matter afresh in light of Rejimon Padickapparambil Alex and grant an opportunity of hearing within 3 months (Para 4).

3. The appeal filed by the petitioner was ordered to be treated as closed, and the pre-deposit made shall be refunded upon application (Para 4).

4. Writ petition was allowed (Para 4).

Between Fine Lines (5-Line Summary)

• Merely utilising IGST ITC under CGST/SGST heads is not wrong availment.

• The assessment order imposing liability of ₹19.94 lakhs was quashed.

• The Court directed a fresh reconsideration in line with earlier precedent.

• Petitioner’s pending appeal was closed to avoid duplication.

• Pre-deposit refund ordered upon application.

Summary of Referred Cases

Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”