Supreme Court disallows Rs 923-crore GST refund to Bharti Airtel

By: |
October 30, 2021 4:45 AM

A Bench led by Justice AM Khanwilkar, on the tax department’s appeal, set aside the Delhi High Court’s May 2020 order that allowed Bharti to rectify Form GSTR-3B for July to September 2017, saying such directions “cannot be sustained.”

The SC Bench agreed with the tax department’s stand that any indulgence shown contrary to the statutory mandate would not only be an illegality but in reality would simply lead to collapse of tax administration of Union, states and Union Territories.The SC Bench agreed with the tax department’s stand that any indulgence shown contrary to the statutory mandate would not only be an illegality but in reality would simply lead to collapse of tax administration of Union, states and Union Territories.

The Supreme Court has disallowed Sunil Bharti-led Bharti Airtel’s claim for goods and services tax (GST) refund of Rs 923 crore, saying such refunds, based on ‘unilateral’ rectification of electronically-filed returns by a taxpayer on a self-assessment basis would lead to a ‘chaotic situation’ and have a cascading effect on the stakeholders in the relevant transaction chain.

A Bench led by Justice AM Khanwilkar, on the tax department’s appeal, set aside the Delhi High Court’s May 2020 order that allowed Bharti to rectify Form GSTR-3B for July to September 2017, saying such directions “cannot be sustained.”

While the tax authorities had denied any refund alleging that the company had under-reported input tax credit during the period, the company claimed it had paid excess tax of Rs 923 crore on inputs based on estimates since the GSTR-2A form was not operational during the error period.

The apex court said that the law permits rectification of errors and omissions only at the initial stages of Forms GSTR-1 and GSTR-3 in the specified manner.
The SC Bench agreed with the tax department’s stand that any indulgence shown contrary to the statutory mandate would not only be an illegality but in reality would simply lead to collapse of tax administration of Union, states and Union Territories.

The top court further said that despite an express mechanism provided by Section 39(9) read with Rule 61, it was not open to the High Court to proceed on the assumption that the only remedy that can enable the assessee to enjoy the benefit of the seamless utilisation of the input tax credit was by way of rectification of its return submitted in Form GSTR­3B for the relevant period in which the error had occurred.

The GST department had stated that the finding of the HC that there is no statutory provision permitting rectification of errors only in the return with respect to the month in which such error is noticed and not in the return with respect to the month in which the error relates, overlooks and directly contravenes the express wordings of Section 39(9) of the Central Goods and Services Tax Act, 2017.

“Form GSTR­2A is only a facilitator for taking an informed decision while doing such self­-assessment. Non-performance or non-­operability of Form GSTR­2A or for that matter, other forms, will be of no avail because the dispensation stipulated at the relevant time obliged the registered person to submit returns on the basis of such self-­assessment in Form GSTR­3B manually on electronic platform. The provision contained in Section 39(9) of the 2017 Act and Rule 61 of the Rules framed thereunder, as applicable at the relevant time, apply with full vigor to the returns filed by the registered person in Form GSTR­3B,” the judges said in its 52-page judgment.

It further stated that Airtel was not denied the opportunity to rectify omission or incorrect particulars, which the assessee could do in the return to be furnished for the month or quarter in which such omission or incorrect particulars are noticed. “Thus, it is not a case of denial of availment of ITC as such. If at all, it is only a postponement of availment of input tax credit (ITC). The ITC amount remains intact in the electronic credit ledger, which can be availed in the subsequent returns including the next financial year.”

Bharti while seeking refund of ‘excess tax’ of Rs 923 crore wanted to correct the anomaly in October 2018 as it had under-reported its claim for credit. But the assessee was prevented from doing so as the government’s December 2017 circular disallowed companies from making rectifications under the earlier circular of September 2017.

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