Technical Error in Claiming IGST Credit as CGST/SGST Does Not Constitute Wrongful Availment of ITC | HC

Case Details: Joint Kalleppuram Metals v. Union of India - [2025] 171 taxmann.com 32 (Kerala)

Judiciary and Counsel Details

• Bechu Kurian Thomas, J.
• Karthika Maria, Anil Sebastian Pulickel, Arun Thomas, Shinto Mathew Abraham, Joe S. Adhikaram, Mathew Nevin Thomas, Veena Raveendran, Leah Rachel Ninan, Anjaly Elias, Shyni William, Navya Seby & Kurian Antony Mathew, Advs. for the Petitioner.
• Dr. Thushara James, Sr. Govt. Pleader & V. Girishkumar, SC for the Respondent.

Facts of the Case

The assessee, a partnership firm engaged in wholesale trading of iron and steel, was subjected to scrutiny of its returns for the financial year 2017-18. During the assessment, the tax authorities alleged that the assessee had incorrectly availed Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) input tax credits instead of Integrated Goods and Services Tax (IGST) credit. A notice was issued, contending that the IGST credit had been erroneously classified as CGST and SGST, leading to an alleged wrongful availment of input tax credit (ITC).

Based on this allegation, the Adjudicating Authority confirmed the demand, along with interest and penalty, under Section 73(1) of the Central Goods and Services Tax Act, 2017 (GST Act). The assessee, aggrieved by the decision, filed a writ petition challenging the imposition of demand and penalty on the ground that the classification error did not result in any actual loss to the revenue.

High Court Held

The Hon’ble Kerala High Court held that the assessee’s misclassification of IGST credit as CGST and SGST was a mere technical error rather than a wrongful claim of ITC. The Court emphasized that the GST framework treats the electronic credit ledger as a unified ledger, where credits are fungible across tax heads within the permitted structure. Since the eligible IGST credit was available, and there was no excess claim beyond the rightful entitlement, the Court ruled that the invocation of Section 73 was unjustified. It was further observed that Section 73 is applicable only when tax has not been paid, has been short paid, erroneously refunded, or ITC has been wrongly availed or utilized. As no revenue loss or fraudulent intent was established, the demand and penalty were deemed unsustainable. Consequently, the appellate order was set aside and the matter was remanded for reconsideration in accordance with these findings.

List of Cases Reviewed

• Rejimon Padickapparambil Alex v. Union of India [2024 KHC Online 7215] – [Para 4] followed.