Kerala HC Sets Aside Rectification Rejection Order, Directs to Reconsider DRC-03 Payment for Excess ITC with Alleged Typographical Error in Financial Year [Read Order]
The Court held that a bona fide typographical error in the financial year in a DRC-03 form should not lead to the rejection of a huge voluntary tax payment and directed the authorities to reconsider the taxpayer's rectification application
Kerala High Court, Typographical Error, DRC-03 Payment
Kerala High Court, Typographical Error, DRC-03 Payment
The Kerala High Court has set aside an order dismissing a rectification application and directed the Deputy Commissioner to reconsider the payment of Goods and Services Tax (GST) made voluntarily to reverse wrongly availed Input Tax Credit (ITC), even though the payment form contained a typographical error regarding the financial year.
Lotus Pharmaceuticals (petitioner) was alleged to have availed excess ITC for the financial year 2018-19. Upon realizing the error, the petitioner voluntarily paid the entire tax due, reversed the ITC, and filed an intimation via Form DRC-03 on 30.01.2020, as required under Rule 142(2) of the CGST Rules, 2017.
However, in the DRC-03 intimation, the financial year was mistakenly mentioned as 2019-20 instead of the correct period, 2018-19.
The department rejected the petitioner’s objections in an order dated 20.04.2024, observing that the DRC-03 could not be accepted as it related to the wrong period (2019-20). This resulted in the imposition of a total liability of Rs. 6,88,64,182/-, inclusive of tax, interest, and penalty.
The petitioner filed a rectification application under Section 161 of the CGST/SGST Act, arguing that the substantial payment of Rs. 3,50,38,644/- could only be for the 2018-19 liability, especially since no liability was pending for 2019-20.
The petitioner clarified that the reference to 2019-20 was merely a typographical error. The rectification application was, however, dismissed by an order dated 29.11.2024.
The bench comprising Justice Bechu Kurian Thomas observed that when a huge amount of money is paid voluntarily, and there is no case that any liability existed for the financial year mentioned in the form (2019-20), the proper officer should have either rejected the intimation immediately or identified the mistake from the available records.
Citing previous decisions that the term ‘record’ for rectification includes all proceedings and documents available in respect of the case, the Court observed that a taxpayer should not be penalized with an exorbitant amount for a bonafide error that could have been identified from the portal records.
The Court held that such an imposition would lack the backing of Article 265 of the Constitution of India. The Court set aside the order dismissing the rectification application and directed the Deputy Commissioner (the third respondent) to reconsider the application after granting an opportunity of hearing to the petitioner, to be completed within three months.
In the result, the writ petition filed by the petitioner was allowed.
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