Supreme Court Directs CBIC to Re-examine Timelines for Correcting Bona Fide Errors in GST Filings [Read Order]

The Supreme Court of India has directed the Central Board of Indirect Taxes and Customs ( CBIC ) to revisit and re-evaluate the statutory provisions and timelines that govern the correction of bona fide errors. It stressed that the timelines should be realistic.

The directive came while dismissing a Special Leave Petition (SLP) filed by the CBIC in the matter of Central Board of Indirect Taxes and Customs vs. Aberdare Technologies Pvt. Ltd.

The case is about a clerical error which led to the denial of Input Tax Credit ( ITC ) to the purchaser, despite the fact that tax had already been duly paid. The Bombay High Court, in its earlier ruling, had granted relief to the respondent-Aberdare Technologies by recognizing the absence of any revenue loss and the genuine nature of the mistake.

When CBIC challenged this order before the Supreme Court, the apex bench comprising the Chief Justice of India and Justice Sanjay Kumar upheld the Bombay High Court’s decision observing that “the impugned judgment which is, in fact, just and fair, as there is no loss of revenue. Hence, the present special leave petition is dismissed.”

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The court stated that “The petitioner, Central Board of Indirect Taxes and Customs, must re-examine the provisions/timelines fixed for correcting the bonafide errors. Time lines should be realist as lapse/defect invariably is realized when input tax credit is denied to the purchaser when benefit of tax paid is denied. Purchaser is not at fault, having paid the tax amount. He suffers because he is denied benefit of tax paid by him. Consequently, he has to make double payment.”

It also added that “Human errors and mistakes are normal, and errors are also made by the Revenue. Right to correct mistakes in the nature of clerical or arithmetical error is a right that flows from right to do business and should not be denied unless there is a good justification and reason to deny benefit of correction. Software limitation itself cannot be a good justification, as software are meant ease compliance and can be configured. Therefore, we exercise our discretion and dismiss the special leave petition.”

Further, the Court expressed reservations about earlier High Court rulings in Bar Code India Limited v. Union of India and Yokohama India Private Limited v. State of Telangana, observing that the ratio decidendi in these cases “may not lay down good law” and could be re-evaluated in a future proceeding.

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