Court Grants Rectification in Landmark GST Dispute
In a recent legal milestone, a petitioner from the electronic component manufacturing sector sought rectification for an inadvertent error in the filing of GST returns. The case involved a regular supplier to Bajaj Auto Limited (BAL), which inadvertently reported the GST identification number of third-party vendors instead of BAL during the filing of Form GSTR-1. As a result of the erroneous GST identification number, BAL could not claim Input Tax Credit (ITC), leading to a situation where they withheld payment to the petitioner for the GST part of the corresponding invoices. This unintended consequence became a significant issue in the subsequent legal proceedings.
During the financial year 2021-2022, Star Engineers delivered goods to third-party vendors and later realized the error post the due date for correction. Despite the petitioner's proactive steps, including obtaining confirmation from third-party vendors regarding the non-availment of Input Tax Credit (ITC), the Deputy Commissioner rejected the rectification request. This led to the petitioner filing a petition challenging the order.
The petitioner argued that the rejection was arbitrary, emphasizing the absence of revenue loss to the government. The legal counsel relied on precedent cases supporting rectification for inadvertent errors, asserting that technicalities should not compromise justice.
The Revenue's counsel acknowledged the lack of revenue loss but contended that the GST Act did not permit rectification post the due date.
After an examination of the statutory provisions (Sections 37, 38, and 39 of CGST/MGST, 2017), the court found merit in the petitioner's argument. It emphasized that preventing rectification for bona fide and inadvertent errors would lead to absurd results, contrary to legislative intent. The court referred to similar cases where rectification was granted, emphasizing the need for the GST regime, being electronic, to accommodate inadvertent errors by traders adjusting to the new system. The decision stressed the importance of an assessee-friendly approach and recognized that rectification in such cases did not result in revenue loss.
In a significant ruling, the court granted the petitioner's plea, directing the respondents to permit the amendment/rectification of Form GSTR-1 within four weeks and saved ITC. This decision underscores the imperative for a pragmatic and assessee-friendly interpretation of GST laws in cases involving inadvertent errors.
Click to read full Judgement star engineers (i) (p.) ltd. v. union of india