2025 (5) TMI 2066 - HC - GST

Challenge to order of assessment issued by the fifth respondent - eligible Input Tax Credit was by mistake claimed under different heads - HELD THAT - In the decision in Rejimon Padickapparambil Alex v. Union of India and Others 2024 (12) TMI 399 - KERALA HIGH COURT a Division Bench of this Court had observed that the electronic credit ledger is in the nature of a wallet with different compartments of Integrated Goods and Services Tax Central Goods and Services Tax and State Goods and Services Tax and there cannot be any wrong availing of Input Tax Credit merely because a taxpayer had availed the benefit of credit of input tax available in one compartment under the other. It has also been observed after referring to Circular No. 192/04/2023-GST that the Input Tax Credit available in the electronic credit ledger should be considered as a pool of funds designated for different types of taxes such as CGST IGST and SGST. Relying upon the circular it is also observed that for utilizing the IGST liability the eligibility of the fund for payment is based on the total balance in the entire wallet and not just the IGST compartment. It is thereafter held that the GST system treats the electronic credit ledger as a unified resource and interest is incurred if collectively the available funds fall below the amount of wrongly availed credit during the specified period. The aforesaid proposition of law clarifies the legal scenario relating to the utilisation of Input Tax Credit under the different compartments available in the electronic credit ledger. The said proposition has a bearing in the instant case. However since the assessing officer as well as the Appellate Authority has proceeded on the basis that such availment under any count is legally not justified the impugned orders are liable to be set aside and a reconsideration be directed. Conclusion - Since the assessing and appellate authorities had erred in rejecting the ITC claim on the basis that availment under any head was legally unjustified the Court set aside the impugned orders and directed the fifth respondent to reconsider the matter afresh within three months. Petition allowed by way of remand.

Summary

The Kerala High Court, through Justice Bechu Kurian Thomas, allowed the writ petition challenging the assessment order (Exhibit-P14), appellate order (Exhibit-P15), and consequential demand (Exhibit-P16) issued under Section 73 of the Central Goods and Services Tax Act, 2017. The petitioner had mistakenly claimed Input Tax Credit (ITC) under incorrect heads during the transition from VAT to GST for the assessment year 2017-18.Relying on the Division Bench decision in *Rejimon Padickapparambil Alex v. Union of India and Others* [2024 KHC Online 7215], the Court emphasized that the electronic credit ledger functions as a "wallet with different compartments" (CGST, IGST, SGST) and ITC should be treated as a "pool of funds" rather than segregated credits. The Court noted that "there cannot be any wrong availing of Input Tax Credit merely because a taxpayer had availed the benefit of credit of input tax available in one compartment under the other," and that the GST system treats the ledger as a "unified resource."Since the assessing and appellate authorities had erred in rejecting the ITC claim on the basis that availment under any head was legally unjustified, the Court set aside the impugned orders and directed the fifth respondent to reconsider the matter afresh within three months. Consequently, the demand notice (Exhibit-P16) was quashed. The writ petition was allowed accordingly.