Madras HC directs Department to Process ITC Claim Rejected Solely on the Basis of Inadvertent Error

Last updated: 24 November 2022

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Quick Summary

The Madras High Court has ruled that the GST department must process Input Tax Credit (ITC) claims that were rejected solely due to an inadvertent error. In this case, Abi Egg Traders mistakenly selected 'with payment of tax' instead of 'without payment of tax' when filing their GSTR-3B for exports. The court found the error to be bona fide and affirmed the petitioner's entitlement to ITC on tax-exempt exports, setting aside the rejection.

Court :
Madras HC

Brief :
The Hon'ble Madras High Court in the case of Abi Egg Traders v. Assistant Commissioner, Salem II Division, O/o The Assistant Commissioner of Goods and Services Tax Central Excise [W.P.No.3773 of 2020] ruled in favor of the assessee by directing the department to process the Input Tax Credit ("ITC") claim that were previously rejected solely on the ground of inadvertent error.

Citation :
W.P.No.3773 of 2020

The Hon'ble Madras High Court in the case of Abi Egg Traders v. Assistant Commissioner, Salem II Division, O/o The Assistant Commissioner of Goods and Services Tax Central Excise [W.P.No.3773 of 2020] ruled in favor of the assessee by directing the department to process the Input Tax Credit ("ITC") claim that were previously rejected solely on the ground of inadvertent error.

Facts

Abi Egg Traders ("the Petitioner") is a sole proprietor engaged in the business of export of eggs. Since eggs are a "nil" rated commodity, there is no tax burden associated with their export. Hence, the Petitioner was entitled to the Input Tax Credit that had accumulated on the exports. The period in question is August 1, 2017 to March 31, 2018, for which return in form GSTR-3B was filed in May 2018.

The Petitioner made a mistake while exporting as it opted for column ‘with payment of tax ' instead of ‘without payment of tax'.

Issue

Whether department can reject ITC claim solely on the basis of inadvertent error?

Held

The court observed and directed the following:

Department nowhere mentioned dispute the Petitioner's right to refund and in fact conceded that the mistake was made bonafide and reaffirmed that the petitioner was entitled to the ITC return because the export was exempt from tax.
Therefore, in such circumstances, rejecting the refund solely on the inadvertent error was set side.
The Court granted 8 weeks from the date of Order to the officer to issue refund within stipulated time period.

FAQ :

The Madras High Court ruled that the GST department must process Input Tax Credit (ITC) claims that were rejected solely because of an inadvertent error.

Abi Egg Traders mistakenly opted for the 'with payment of tax' column instead of 'without payment of tax' when filing their GSTR-3B return for the export of eggs.

Abi Egg Traders was exporting eggs, which are a 'nil' rated commodity, meaning they are exempt from tax. Therefore, they were entitled to claim the accumulated Input Tax Credit on these exports.

According to this ruling, ITC claims cannot be rejected solely on the basis of an inadvertent or bona fide error, especially when the assessee is otherwise entitled to the credit.

The court granted the officer 8 weeks from the date of the order to issue the refund.