Facts

• The Petitioner was served a Show Cause Notice under Section 73 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) wherein it was alleged that it had wrongly availed IGST credit as CGST and SGST credits. The proposed demand was confirmed by the Adjudicating Authority and later by the Appellate Authority
• A writ petition was filed by the Petitioner challenging the order of the Appellate Authority upholding the demand on account of incorrect cross availment of Input Tax Credit (‘ITC’)

Issue before the Hon’ble High Court of Kerela

• Whether the availment of IGST credit as CGST and SGST credits would amount to wrongful availment of ITC?

Discussion & Ruling

The Hon’ble High Court of Kerela set aside the demand order with directions to the Appellate Authority to reconsider the appeal, based on the following aspects:

• In an similar case of Rejimon Padickapparambil Alex v. Union of India (2024 VIL 1284-Ker), the High Court held that the ITC available in the electronic credit ledger should be considered as a pool of funds designated for different types of taxes, such as IGST, CGST and SGST. The said credit ledger represents a wallet with compartments for IGST, CGST and SGST funds and the entire wallet has to be taken into consideration, instead of individual compartments
• Section 73 of the CGST Act is attracted only when tax has not been paid or short paid, or where any ITC has been wrongly availed or utilised for any reason
• Since the GST system treats the electronic credit ledger as a unified source, it cannot be construed that the Petitioner had wrongly availed ITC and at the most it was a technical mistake (as credit of CGST/ SGST was availed instead of IGST)
• There is no loss of revenue arising from the utilization of CGST/ SGST instead of IGST