Wrong Availment of ITC under CGST/SGST Instead of IGST – Matter Remanded

Case Title: Maruthengal Moideen & Ors. v. State Tax Officer & Ors.
Court: High Court of Kerala at Ernakulam
Petition No.: WP(C) No. 20837 of 2024
Date of Judgment: 13 January 2025
Category of Dispute: Input Tax Credit (ITC) – Wrong Head of Tax (CGST/SGST instead of IGST)
Relevant Sections: Section 16(2)(c), Section 73, Section 161 of CGST Act, 2017; Article 226 of Constitution of India

Facts of the Case (Para 1–2 of Judgment)

• The petitioner, a registered taxpayer, availed ITC under CGST and SGST instead of IGST.

• Proceedings were initiated under Section 73 of CGST Act, alleging wrongful availment of ITC (contrary to Section 16(2)(c)).

• An order (Ext.P6) determined excess ITC of ₹2,00,219 each under CGST & SGST, directing repayment with interest & penalty.

• A rectification petition under Section 161 was filed but rejected (Ext.P10).

• Hence, the petitioner challenged both orders before the High Court.

Question(s) in Consideration (Para 2–3)

• Whether availment of IGST credit wrongly under CGST/SGST heads amounts to “wrong availment of ITC” under GST law?

• Whether such a mistake is substantive or merely a technical entry error in the electronic credit ledger?

Observations of the Court (Para 4–5)

• The Court relied on Rejimon Padickapparambil Alex v. Union of India (2024 KHC Online 7215), where it was held that no wrong availment arises when credit available in IGST was taken under CGST/SGST heads.

• The electronic credit ledger should be treated as a “pool of funds with separate compartments” for IGST, CGST, and SGST.

• Such errors are ledger misclassification, not fraudulent availment of ineligible ITC.

Judgment of the Court (Para 6)

• The Court set aside Ext.P6 and Ext.P10 orders.

• Directed the State Tax Officer to reconsider the matter afresh, keeping in mind the principle laid down in Rejimon Padickapparambil Alex.

• Timeframe: Three months from receipt of the judgment.

• Writ petition allowed.

Between Fine Lines (Simple Summary)

1. Claiming IGST credit under CGST/SGST is a clerical error, not fraud.

2. ITC ledger is a pool – funds wrongly placed under a different head still belong to taxpayer.

3. Kerala HC applied Rejimon Padickapparambil to protect taxpayers from penal action.

4. Orders demanding repayment were quashed and matter remanded.

5. Tax officers must consider substance over form in ITC classification.

Summary of Referred Cases

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