Bharti Airtel Limited v. Union of India & Ors
[Citation -2020-LL-0505-14]

Citation 2020-LL-0505-14
Appellant Name Bharti Airtel Limited
Respondent Name Union of India & Ors.
Relevant Act CGST
Date of Order 05/05/2020
Judgment View Judgment
Keyword Tags telecommunication services • imposition of interest • goods and services tax • extension of time • inadvertent error • input tax credit • filing of return • statutory right • excess payment • payment of tax • stock transfer • tax liability • ultra vires • future date • excess tax • penalty • refund

IN HIGH COURT OF DELHI AT NEW DELHI Reserved on: 07.11.2019 Pronounced on: 05.05.2020 W.P.(C) 6345/2018, CM APPL. 45505/2019 BHARTI AIRTEL LIMITED ..... Petitioner Through: Mr. Tarun Gulati, Sr. Adv. with Mr.Sparsh Bhargava, Mr. Vipin Upadhyay, Mr.Shashi Mathews, Mr. Kamal Arya, Advs. versus UNION OF INDIA & ORS. ..... Respondents Through: Mr. Harpreet Singh, Sr. Standing counsel for R-2 to 4 with Ms. Suhani Mathur, Adv. CORAM: HON BLE MR.JUSTICE VIPIN SANGHI HON BLE MR.JUSTICE SANJEEV NARULA JUDGMENT SANJEEV NARULA, J. 1. Bharti Airtel Limited (hereinafter referred to as Petitioner ) has preferred present petition under Article 226 of Constitution of India impugning inter alia, Rule 61 (5) of GST Rules, Form GSTR- 3B and Circular No. 26/26/2017-GST (hereinafter referred to as impugned circular ) dated 29.12.2017 as ultra vires provisions of Central Goods and Services Tax Act, 2017 (CGST Act) and contrary to Articles 14, 19 and 265 of Constitution of India. challenge to aforenoted provisions is principally for reason that Petitioner is being prevented from correcting its monthly GST returns, and consequently seeking refund of excess W.P.(C) 6345/2018 Page 1 of 25 taxes paid. Brief Factual Background - Controversy 2. To fully comprehend tax provisions and circulars that are coming in way of Petitioner to correct errors it has noticed, we would have to advert to facts of case and also reflect upon statutory scheme of GST filings and also take note of circumstances that led to this situation. To begin with, let us briefly note facts - Petitioner is engaged in business of providing telecommunication services in India, including Delhi, by virtue of license granted by Department of Telecommunication, Government of India. With implementation of GST, it took registration in each and every State and Union Territory and now has 50 registrations under GST laws for making payment of CGST, SGST and IGST. Since compliance regime under GST laws is significantly different and statutory provisions provide for complete electronic model of compliances, Petitioner remoulded its system from centralized registration under erstwhile service tax regime, to multiple registrations under GST in order to bring it in conformity with new laws. This included introduction of technical changes for enabling filing of statutory Forms GSTR-1, 2 and 3. However, while putting new law into practice, Government could not operationalise Forms GSTR-2 and 3 and, as result summary scheme of filing Form GSTR- 3B was introduced. petitioner states that this half-baked step of Respondents is root cause in failure of system in detecting errors which in course of time created situation wherein petitioner finds itself. W.P.(C) 6345/2018 Page 2 of 25 3. Petitioner recounts that during initial phase of GST regime it was facing issues on electronic system i.e. Goods and Services Tax Network (GSTN) portal created by Government as same was not equipped to handle transition from erstwhile regime to GST. In this transition phase, several issues cropped up which had significant impact on tax paid, output liability, and ITC of Petitioner and led to occurrence of several inadvertent errors. To illustrate few, invoices were accidently missed while filing Form GSTR-3B; credit notes pertaining to invoices issued under erstwhile regime were overlooked and, as result, output tax liability was over-reported; certain transactions like stock transfer from one place of business to another under same GST Registration was reported as supply; in few instances, due to inadvertent error, NIL Form GSTR-3B were filed, though actually there was output tax liability. To sum it up, paramount grievance of Petitioner is that during period from July, 2017 to September, 2017 (hereinafter referred to as relevant period ), Petitioner in its monthly GSTR- 3B recorded ITC based on its estimate. As result, when Petitioner had to discharge GST liability for relevant period, details of ITC available were not known and Petitioner was compelled to discharge its tax liability in cash, although, actually ITC was available with it but was not reflected in system on account of lack of data. exact ITC available for relevant period was discovered only later in month October 2018, when Government operationalized Form GSTR-2A for past periods. Thereupon, precise details were computed and Petitioner realized that for relevant period ITC had been under reported. Petitioner alleges that there has been excess payment of taxes, by way of cash, to tune of W.P.(C) 6345/2018 Page 3 of 25 approximately Rs. 923 crores. This was occasioned to great degree due to non-operationalization of Forms GSTR-2A, GSTR-2 and GSTR-3 and system related checks which could have forewarned petitioner about mistake. Moreover, since there were no checks on Form GSTR-3B which was manually filled up by Petitioner, excess payment of tax went unnoticed. Petitioner now desires to correct its returns, but is being prevented from doing so, as there is no enabling statutory procedure implemented by Government. Impugned Circular- Existing Framework 4. On 01.09.2017, by Circular No. 7/7/2017-GST, Government provided for system based reconciliation of information furnished in Form GSTR-1 and Form GSTR-2 with Form GSTR-3B. Paragraph 6 of this circular specifically reiterated fact that any differences in details of outward supplies and ITC will be corrected in that particular month to which details pertain. Paragraph 9 of this circular further provided that where eligible ITC recorded in GSTR-3B is less than ITC shown in GSTR-2, then ITC will be correctly reflected in GSTR-3 of that very month. Thus, Circular provided for reconciliation between information furnished in Form GSTR-3B with that reflected in Form GSTR-1 and Form GSTR-2. It also provided that if details of eligible ITC have been reported incorrectly, same maybe reported correctly in Form GSTR-2 for concerned tax period. 5. However, on 29.12.2017, by issuing Circular No. 26/26/2017-GST, Government kept Circular No. 7/7/2017-GST in abeyance due to W.P.(C) 6345/2018 Page 4 of 25 continuing extension of time lines to file Form GSTR-1, 2 and 3 and non- availability of facility to file Form GSTR-2. As matter of fact, Para 3.2 of impugned circular states that since Form GSTR-2 and 3 could not be operationalized, Circular dated 07.07.2018 is kept in abeyance till such time these two returns are operationalized. Thereafter, para 4 of impugned circular states that Form GSTR-3B can be corrected only in month in which errors were noticed. 6. In above background, Petitioner s grievance is that there is no rationale for not allowing rectification in month for which statutory return has been filed. This is also totally contrary to statutory scheme of CGST Act - which provides that data filled by registered person will be validated in that month itself, and thereafter any unmatched details be rectified in month in which it is noticed. Accordingly, Petitioner impugns Rule 61 (5) From GSTR-3B and Circular No. 26/26/2017-GST dated 29.12.2017 as ultra vires provisions of CGST Act to extent, they do not provide for modification of information to be filled in return of tax period to which such information relates. aforesaid provisions are also impugned on ground that they are arbitrary, in violation of Articles 14, 19(1)(g), 265 and 300A of Constitution of India. Submissions of Learned Counsel 7. Mr. Tarun Gulati, learned Sr. Counsel for Petitioner argued that impugned circular is ultra vires CGST Act and Rules. He submits that as per Sections 37 to 43 of CGST Act, scheme for filling details of outward supplies, inward supplies, return of inward or outward W.P.(C) 6345/2018 Page 5 of 25 supplies, ITC availed, tax paid, was to be followed. In these terms, Petitioner has statutory right to fill all necessary details, when aforesaid provisions of Act became enforceable. He submits that inability of Respondents to run their IT system as per structure provided under CGST Act cannot prejudice rights of registered person. Mr. Gulati explains that on account of major shift from single service tax registration regime, to GST, it resulted in Petitioner having to collate crores of transactions both on output side and input side. Besides, registrations were to be obtained in 29 States and 7 Union Territories. This required enormous compilation of data and was humongous task. possibility of error in compilation of data cannot be ruled out especially since inbuilt self-check mechanism contemplated under CGST Act had not been activated. Elaborating further, Mr. Gulati submits that Form GSTR-3B, prescribed under Rule 61 (5) is only summary return that has been introduced by Government in absence of Form GSTSR-2 and 3 being made operational. This Form is filled in manually and, therefore, has no inbuilt checks and balances that could ensure that data uploaded by Petitioner was accurate, verified and validated. summary scheme introduced by Rule 61 (5) being in complete variance with machinery originally contemplated under GST Scheme, stifled rights of Petitioner by not permitting validation of data prior to same being uploaded. In absence of such validation, chances of incorrect data being uploaded cannot be eliminated. This resulted in adverse consequences in nature of imposition of interest and penalty under provisions of CGST Act. W.P.(C) 6345/2018 Page 6 of 25 8. Mr. Gulati further argued that delay in operationalizing Form GSTR- 2A, process which was statutorily mandated, cannot defeat rights of Petitioner to take and use credit in month in which it was due. Since statutory scheme originally envisaged under Act could not be implemented and summary scheme has been adopted, Government should allow assessees to exercise their rights available under provisions of Act. Mr. Gulati, placed reliance upon judgment of Gujarat High Court in case of APP & Company Chartered Accountants V. Union of India, 2019-TIOL-1422-HC-AHM-GST and submitted that Court has observed that Form GSTR-3B was not return required to be filed under Section 39 of CGST Act and was only temporary facility and as such delay in claiming credit cannot delay period for which same is claimed i.e. last date for filing Form GSTR-3B. Reliance was also placed upon decision of Andhra Pradesh High Court in case of Panduranga Stone Crushers v. Union of India, 2019-TIOL-1975-HC-AP- GST and also upon decision of Punjab & Haryana High Court in case of Adfert Technologies Pvt. Ltd. v. Union of India & Ors., 2019-VIL-537- P&H. It was further submitted that this Court has also in plethora of cases including Lease Plan India Pvt. Ltd. v. Govt. of NCT & Ors. [order dated 13.09.2019 - W.P. (C) 3309/2019] and Blue Bird Pure Pvt. Ltd v. Union of India & Ors., [order dated 22.07.2019 - W.P.(C) 3798/2019] , observed that GST is still in trial and error phase and has permitted assesses to rectify/revise returns. Lastly, it was argued that revision of Form GSTR-3B is revenue neutral since Respondents have already realised tax leviable under law. Moreover, eligibility of Petitioner in respect of ITC claimed under rectified/amended returns can be W.P.(C) 6345/2018 Page 7 of 25 verified prior to rectification. 9. Per contra, Mr. Harpreet Singh, learned Sr. Standing counsel on behalf of GST department submitted that impugned circular in present petition does provide for rectification of mistakes pertaining to earlier tax period in any subsequent tax period. He submitted that such changes have to be incorporated in return for tax period in which error is noted. assessee cannot, however, reflect change in Form GSTR-3B of original tax period. rationale behind such restriction was sought to be explained by referring to sub-section (9) of Section 39 of CGST Act, 2017. 10. Mr. Singh, further submitted that vide Section 17 (c) (i) of CGST (Amendment) Act, 2018, certain amendments have been carried out in aforesaid provision. He clarified that amended provisions have not been made operational yet, since notification No. 02/2019-Central Tax dated 29.01.2019 clearly provides that Section 17 of CGST (Amendment) Act, 2018 shall not come into force. Nevertheless, even if this amendment would eventually come into effect, it shall apply prospectively from future date and would not apply to tax period from July, 2017 to September, 2017, which is relevant period in question. 11. Mr. Singh submitted that it is not that as if Act does not provide for rectification at all. In respect of particulars furnished for earlier tax period, made at later date in Form GSTR-3B, rectification shall get reflected in return in earlier tax period. In this manner, original W.P.(C) 6345/2018 Page 8 of 25 return shall not get amended in light of corrections made post-facto. Circular No. 26/26/2017-GST dated 29.12.2017 clarifies same, and is aligned with provisions of statute. In this regard, it is to be noted that GST, being indirect tax is levied along entire supply chain. tax paid on outward supplies entitles recipient of such supplies to avail ITC for same. Thus, if changes made to particulars furnished by supplier are allowed to be reflected in relevant previous tax period (Form GSTR- 3B for which return has already been filed), it would require modification of particulars furnished in Form GSTR-3B (of such earlier tax period) by recipient. For example- if supplier reduces tax liability for earlier tax period (for which Form GSTR-3B has already been filed), this would require modification of recipient s Form GSTR-3B (which has already been filed) by way of commensurate reduction in ITC availed by him. This would enhance compliance burden for recipient. Another complexity would arise if such recipient is exporter and claims refund of unutilized ITC under section 54(3) of CGST Act, 2017 read with rule 89 (4) of CGST Rules, 2017. In cases where refund has already been sanctioned and disbursed, reduction of available ITC by recipient would make it fit case for erroneous refund, thereby inviting demand under section 73 of CGST Act, 2017. Thus, in order to ward of such complexities, impugned circular and provisions provide for rectification of GSTR-3B in period subsequent to when error etc. is noticed by assessee and not for period to which such error etc. pertains to. Analysis 12. controversy in present case actually lies in narrow compass. W.P.(C) 6345/2018 Page 9 of 25 grievance of Petitioner pertains to rectification of Form GSTR- 3B for period from July to September, 2017. This is tax period/month in which error has crept in. Though, question before us is short one, however, since same concerns scheme of CGST Act, we would have to delve into concepts of filing of returns and statutory provisions governing same. Scheme of filing of returns as envisaged by CGST Act is explained herein below: a) Section 37(1) of CGST Act provides that registered person is required to file return (Form GSTR- 1) containing details of his outward supply for tax period i.e. month. These details of outward supplies of registered person are communicated to recipients in auto-populated return (Form GSTR-2A) under Section 37(1) read with Section 38(1) of CGST Act. b) Section 38(1) of CGST Act provides that registered person shall verify, validate, modify or delete such details of inward supplies communicated under Section 37(1) of CGST Act in Form GSTR-2A. Thereafter, under Section 38(2) of CGST Act recipient files return (Form GSTR-2) containing details of his inward supplies based on Form GSTR 2A. These details are then communicated to suppliers under Section 38(3) of CGST Act and suppliers can accept or reject details under section 37(2) and Form GSTR-1, shall stand amended accordingly. It is important to note that details of inward supplies provided in Form GSTR-2 are auto-populated in ITC ledger of recipient of such supplies on submissions of this form. c) Section 38(5) of CGST Act and 39(9) of CGST Act provide W.P.(C) 6345/2018 Page 10 of 25 that details that have remained unmatched shall be rectified in return to be furnished for month during which such omission or incorrect particulars are noticed. d) Section 39 of CGST Act provides that every registered person shall furnish return (From GSTR-3) of inward and outward supplies, ITC, tax payable, tax paid and such other particulars as may be prescribed. 13. On plain reading of above provisions, it clearly emerges that statutory scheme, as envisaged under Act provided facility for validation of monthly data through IT System of Government wherein output of one dealer (Form GSTR-1), becomes input of another dealer and gets auto-populated in Form GSTR-2 (Inward Supplies). These details had to be electronically populated in Form GSTR-3 (Monthly Return) and tax had to be paid based on this return. CGST Act and CGST Rules as envisaged provided for verification, validation, modification and deletion of information for each period by interaction, over IT System, between supplier and recipient so as to reflect correct details pertaining to tax period in that particular tax period itself (i.e. month). In short, CGST Act contemplated self-policing system under which authenticity of information submitted in returns by registered person is not only auto-populated but is verified by supplier and confirmed by recipient in same month. statutory provisions, therefore, provided not just for procedure but right and facility to registered person by which it can be ensured that ITC availed and returns can be corrected in very month to which they relate, and registered W.P.(C) 6345/2018 Page 11 of 25 person is not visited with any adverse consequences for uploading incorrect data. 14. Now, let us also examine rectification scheme under Act. statute provides for 2-stage rectification procedure by which errors or omissions can be rectified by registered person. a) 1st stage of rectification can happen under Section 37(1) read with Sections 38 (1), 38 (3) and 37 (2) of CGST Act wherein registered person could rectify errors or omissions pertaining to tax period in return to be furnished for such tax period itself through self-policing and auto-populated interaction on system. b) 2nd stage of rectification is provided under Section 38 (5) and 39 (9) of CGST Act wherein, in respect of only unmatched details - which could not be corrected at first stage, rectification could be done in return to be furnished for month during which such omission or incorrect particulars were noticed. 15. While GST regime envisaged filing process and recording of ITC and payment of taxes as above, admittedly, due to system issues and under preparedness with regard to extent of data to be processed, Form GSTR-2, and 3 were not made operational; and have been now completely done away with. Form GSTR-2A was made operational only in September 2018 by Government. This Form is also valid in respect of past periods commencing July 2017. Respondents do not dispute that statutory scheme envisaging filing of return GSTR-2 and 3 could not be W.P.(C) 6345/2018 Page 12 of 25 put into operation and has been indefinitely deferred. This makes it abundantly clear that neither systems of Government were ready, nor were systems of suppliers all across country geared up to handle such elaborate electronic filing and reconciliation system introduced for first time. 16. Since Forms GSTR-2 and 3 could not be operationalized by Government, Government introduced Rule 61(5) (which was amended vide Notification No. 17/2017-Central Tax, dated 27.07.2017) and Rule 61(6) in CGST Rules, and provided for filing of monthly return in Form GSTR-3B which is only summary return. Mr. Singh appearing for Revenue does not controvert submission of Mr. Gulati that Form GSTR- 3B is filled in manually by each registered person and has no inbuilt checks and balances by which it can be ensured that data uploaded by each registered person is accurate, verified and validated. Therefore, design and scheme of Act as envisioned has not been entirely put into operation as yet. In these circumstances we find merit in submission of Mr. Gulati that if statutorily prescribed form i.e. GSTR-2 & 3 had been operationalized by Government - as was envisaged under scheme of Act, Petitioner with reasonable certainty would have known correct ITC available to it in relevant period, and could have discharged its liability through ITC, instead of cash. We also find force in submission of Mr. Gulati that since Form GSTR-2 & 2A were not operationalized - and because systems of various suppliers were not fully geared up to deal with change in compliance mechanism, Petitioner perhaps did not have exact details of input tax credit W.P.(C) 6345/2018 Page 13 of 25 available for initial three months i.e. relevant period. In this situation, since Petitioner s ITC claim was based on estimation and exact amount for relevant period was not known, Petitioner discharged GST liability for relevant period in cash, although, in reality, ITC was available with it (though it was not reflected in system on account of lack of data). Indisputably, if statutorily prescribed returns i.e. GSTR 2 and GSTR 3 had been operationalized by Government, Petitioner would have known correct ITC amount available to it in relevant period, and could have discharged its liability through ITC. As consequence, deficiency in reporting eligible ITC in months of July - September 2017 in form GSTR- 3B has resulted in excess payment of cash by Petitioner. 17. Now that correct figures are known to Petitioner, and limited rectification of returns is permissible, why is Petitioner s grievance not redressed? answer lies in refund provisions that we shall now allude to briefly. These provisions are stumbling block for petitioner to remedy situation. ITC is taken on basis of invoices issued to registered person providing input/output services. This ITC is credited to electronic credit ledger [Section 2 (46) of CGST Act] under section 49(2) of CGST Act. output tax liability of supplier can be paid through utilization of ITC available in electronic credit ledger, or by utilization of amount available in electronic cash ledger [Section 2(43) of CGST Act] under section 49 (1) of CGST Act. Section 54 (1) of CGST Act provides for refund of amount of excess paid tax. said provision read with Circular dated 29.12.2017, deals with W.P.(C) 6345/2018 Page 14 of 25 refund of excess tax paid. Under proviso to section 54 (1) read with Section 49(6), refund of excess input tax credit is allowable only in two situations where there is zero (0) rated tax, or inverted duty structure. Further, refund of cash is allowed in case of excess balance in electronic cash ledger in accordance with Section 46 (6) of CGST Act. Refund can also be claimed if tax is paid on supply which is not provided, either wholly or partially, and for which invoice has not been issued. Furthermore, refund can be given under Section 77 of Act which deals with tax wrongfully collected and paid to Central Government or State Government. Therefore, above provisions would not entirely remedy situation for Petitioner. For this reason, we cannot countenance stand of Respondents as stated in their additional affidavit. Respondents are unreasonably harping on mistake on part of Petitioner for not utilizing of input tax credit on account of erroneous reporting. While Respondents may be correct in stating that case of Petitioner may not qualify as payment of excess tax , but one cannot ignore circumstances narrated above. In first instance, Petitioner has made payment of taxes in cash, only because extent of input tax credit could not be computed. In terms of para 4 of Circular No. 26/26/2017-GST, adjustment of tax liability of input tax credit is permissible in subsequent months. For months of September/October, 2018, output liability for said months was adjusted by following procedure as provided in said circular. However, Mr. Gulati has explained, output tax liability has substantially reduced on account of low tariff in telecom sector. As result, input tax credit which has accumulated on account of erroneous reporting, cannot be fully utilized in prevailing tariff structure. W.P.(C) 6345/2018 Page 15 of 25 surplus input tax credit is expected to grow, for later months as well, and there would be further inflow of input tax credit. In these circumstances, adjustment of tax liability in subsequent tax period would not recompense Petitioner. Mr. Gulati has drawn our attention to tabulations placed on record to illustrate his point. Moreover, even if there is possibility to adjust accumulated ITC in future, that cannot be ground to deprive Petitioner option to fully utilize input tax credit which it is statutorily entitled to do so. 18. While arriving at this conclusion we also have to take into account that Respondents have absolutely failed in operationalizing forms that were originally envisaged under Act. scheme of CGST Act as introduced, contemplated validation and verification of data which was to be uploaded vide Form GSTR-2 & 3. However, in absence of such statutory forms being operationalized on account of lack of technical infrastructure, Form GSTR-3B was introduced and it was required to be filled in manually. There cannot be any dispute that Form GSTR-3B has been brought into operation instead of Form GSTR-2 and GSTR-3. This Form GSTR-3B as introduced by Rule 61 (5) being at variance with other statutory provisions does not permit data validation before it is uploaded. As per Respondents, Form GSTR-3B is return not in addition to GSTR-3, but in place of it, till such time GSTR-3 gets operationalized. Form GSTR-3B which has been brought into operation by virtue of Section 168 of CGST Act, in comparison with Form GSTR-3 is truncated version. Thus, we find merit in submission of Mr. Gulati that with this change brought in by Respondents, form originally contemplated got fundamentally altered. W.P.(C) 6345/2018 Page 16 of 25 As result, checks and balances which were prescribed in original forms got effaced and it cannot be ruled out that this possibly caused inaccuracies to creep in data that is required to be filled in. 19. Acknowledging fact that manual filling of forms can result in errors, Respondents permitted rectification by way of Circular No. 7/7/2017 GST issued by CBEC, relevant portion whereof reads as under: 3. As per provisions of sub-rule (5) of rule 61 of Rules, return in FORM GSTR-3B was required to be furnished when due dates for filing of FORM GSTR-1 and FORM GSTR-2 have been extended. After return in FORM GSTR-3B has been furnished, process of reconciliation between information furnished in FORM GSTR-3B with that furnished in FORM GSTR-1 and FORM GST-2 would be carried out in accordance with provisions of sub-rule (6) of rule 61 of Rules. 4. x x x 5. x x x 6. Correction of erroneous details furnished in FORM GSTR- 3B: In case registered person intends to amend any details furnished in FORM GSTR3B, it may be done in FORM GSTR- 1 or FORM GSTR-2, as case may be. For example, while preparing and furnishing details in FORM GSTR-1, if outward supplies have been under reported or excess reported in FORM GSTR-3B, same maybe correctly reported in FORM GSTR-1. Similarly, if details of inward supplies or eligible ITC have been reported less or more than what they should have been, same maybe reported correctly in FORM GSTR-2. This will get reflected in revised output tax liability or eligible ITC, as case may be, of registered person. details furnished in FORM GSTR-1 and FORM GSTR-2 will be auto-populated and reflected in return in FORM GSTR-3 for that particular month. W.P.(C) 6345/2018 Page 17 of 25 (emphasis supplied) portion of said circular underlined above, provided for reconciliation and restatement of tax liability based on amended ITC of relevant month. Later, Respondent introduced impugned circular No. 26/26/2017- GST dated 29.12.2017, whereby earlier Circular No. 7/7/2017 GST has been kept in abeyance. Para 3 of said Circular provides for amendment/ rectification of errors, para 4 imposes restriction on same and stipulates that rectification of errors can be done concurrently in month in which error is noticed, and not in month to which data relates. relevant portion of said circular is reproduced hereinbelow: 3. Amendment / corrections / rectification of errors: 3.1 Various representations have been received wherein registered persons have requested for clarification on procedure for rectification of errors made while filing their FORM GSTR-3B. In this regard, Circular No. 7/7/2017-GST dated 1st September 2017 was issued which clarified that errors committed while filing FORM GSTR 3B may be rectified while filing FORM GSTR-1 and FORM GSTR-2 of same month. Further, in said circular, it was clarified that system will automatically reconcile data submitted in FORM GSTR-3B with FORM GSTR-1 and FORM GSTR-2, and variations if any will either be offset against output tax liability or added to output tax liability of subsequent months of registered person. 3.2 Since, GST Council has decided that time period of filing of FORM GSTR-2 and FORM GSTR -3 for month of July 2017 to March 2018 would be worked out by Committee of officers, system based reconciliation prescribed under Circular No.7/7/2017-GST dated 1st September 2017 can only be operationalized after relevant notification is issued. said circular is therefore kept in abeyance till such time. W.P.(C) 6345/2018 Page 18 of 25 3.3 common errors while submitting FORM GSTR-3B and steps needed to be taken to rectify same are provided in table annexed herewith. registered person needs to decide at which stage of filing of FORM GSTR-3B he is currently at and also error committed by him. corresponding column in table provides steps to be followed by him to rectify such error. 4. It is clarified that as return in FORM GSTR-3B do not contain provisions for reporting of differential figures for past month(s), said figures may be reported on net basis alongwith values for current month itself in appropriate tables i.e. Table No. 3.1, 3.2, 4 and 5, as case may be. It may be noted that while making adjustment in output tax liability or input tax credit, there can be no negative entries in FORM GSTR-3B. amount remaining for adjustment, if any, may be adjusted in return(s) in FORM GSTR- 3B of subsequent month(s) and, in cases where such adjustment is not feasible, refund may be claimed. Where adjustments have been made in FORM GSTR-3B of multiple months, corresponding adjustments in FORM GSTR-1 should also preferably be made in corresponding months. (emphasis supplied) 20. earlier circular has not been rescinded by impugned circular dated 29.12.2017, but only kept in abeyance. Be that as it may, we see no reason as to why rectification/adjustment is being allowed in month subsequent to when such errors relate, and Respondents have restricted mechanism of rectification to same tax period, in which they were noticed and sought to be rectified. In our view, para 4 of Circular No. 26/26/2017-GST dated 29.12.2017 is not in consonance with provisions of CGST Act, 2017. impugned circular expressly states that time period for filing of Form GSTR-2 and GSTR-3 for months of July, 2017 to March, 2018 would be worked by committee, as system-based W.P.(C) 6345/2018 Page 19 of 25 reconciliation can only be operationalized after relevant notification is issued. Thus, impugned circular, in unequivocal terms, recognizes concept of system-based reconciliation of ITC and output liability for same tax period as per statutory provisions. We, therefore, do not find any cogent reasoning behind logic for restricting rectification only in period in which error is noticed and corrected, and not in period to which it relates. There is no provision under Act that has been brought to our notice which would restrict such rectification. In fact, Respondents contention is to effect thus, Act does not provide that data filled by registered person has to be validated in that month itself. Accordingly Circular No. 26/26/2017-GST dated 29.12.2017 was issued providing that rectification of errors can be done, concurrently in that month in which errors is known and not in month to which data relates is palpably flawed. restriction if any, that can be introduced by way of circular, has to be in conformity with scheme of Act and provisions contained therein. In fact, as noticed above, earlier Circular No. 7/7/2017-GST does recognize that reconciliation is based on amended ITC of relevant month. This is in terms of provisions of CGST Act and Respondents contention is contrary to same. Thus, constraint introduced by para 4 of impugned circular, is arbitrary and contrary to provisions of Act and, therefore, we have no hesitation in declaring it to be so. It is trite proposition of law that circular issued by Board cannot be contrary to Act and Government cannot impose conditions which go against scheme of statutory provisions contained in Act. subordinate legislation must conform to statute under which it is made, and they cannot whittle down benefits granted under statutory provision. W.P.(C) 6345/2018 Page 20 of 25 Respondents have failed to fully enforce scheme of Act, and cannot take benefit of its own wrong of suspension of Statutory Forms and deprive rectification/amendment of returns to reflect ITC pertaining to tax period to which return relates to. Petitioner has substantive right to rectify/adjust ITC for period to which it relates. rectification/ adjustment mechanism for months subsequent to when errors are noticed is contrary to scheme of Act. Respondents cannot defeat this statutory right of Petitioner by putting in fetter by way of impugned circular. Since Respondents could not operationalize statutory forms envisaged under Act, resulting in depriving Petitioner to accurately reconcile its input tax credit, Respondents cannot today deprive Petitioner of benefits that would have accrued in favour of Petitioner, if , such forms would have been enforced. Petitioner, therefore, cannot be denied benefit due to fault of Respondents. 21. In this regard, we may note views of Supreme Court in some of judgments. In case of Commissioner of Central Excise, Bolpur vs. Ratan Melting and Wire Industries, (2008) 13 SCC 1, reference was made by bench of three Judges in Ratan Melting & Wire Industries Case, (2005) 3 SCC 57 to bench of five judges to determine issue of what is binding effect of judgment of Supreme Court vis- -vis CBEC circulars. reference was necessitated in backdrop of confusion created on account of view expressed by five judge bench of Supreme Court in para 11 of Dhiren Chemical Industries Case, (2002) 2 SCC 127 which states that regardless of interpretation that we have placed on said W.P.(C) 6345/2018 Page 21 of 25 phrase, if there are circulars which have been issued by Central Board of Excise and Customs which place different interpretation upon said phrase, that interpretation will be binding upon revenue. In order to elucidate position in this respect, five judge bench in Commissioner of Central Excise, Bolpur vs. Ratan Melting and Wire Industries (supra) referred to its earlier decision in Kalyani Packaging Industry vs. Union of India (2004) 6 SCC 719 and observed that Para 11 of Dhiren Chemical Industries (supra) was rightly clarified therein. In this background, Court held in paragraph 7 as under : 7. Circulars and instructions issued by Board are no doubt binding in law on authorities under respective statutes, but when Supreme Court or High Court declares law on question arising for consideration, it would not be appropriate for court to direct that circular should be given effect to and not view expressed in decision of this Court or High Court. So far as clarifications/circulars issued by Central Government and of State Government are concerned they represent merely their understanding of statutory provisions. They are not binding upon court. It is for court to declare what particular provision of statute says and it is not for executive. Looked at from another angle, circular which is contrary to statutory provisions has really no existence in law. (emphasis supplied) 22. Besides, in case of TATA Teleservices Ltd. Vs. Commissioner of Customs, (2006) 1 SCC 746, question before Supreme Court was whether telephone LSP 340 imported would be entitled to benefit of exemption granted by Notification No. 21/2002-Cus. dated 1.03.2002 to cellular telephones. controversy arose because CBEC issued circular being Circular No. 57/2003 dated June 2003 which defined phrase W.P.(C) 6345/2018 Page 22 of 25 cellular phones and clarified that telephone would not be considered as cellular phone, merely because it works on cellular technology. basic fact was that LSP 340 utilized cellular technology and was mobile, although within limited range. Contrary views were taken by different High Courts and, therefore, matter came up in appeal before Supreme Court. Court while deciding this question, held as under: 10. We are of view that reasoning of Bombay Bench of Tribunal as well as that of Andhra Pradesh High Court must be affirmed and decision of Delhi Tribunal set aside insofar as it relates to eligibility of LSP 340 to benefit of exemption notification. Andhra Pradesh High Court was correct in coming to conclusion that Board had, in impugned circular, predetermined issue of common parlance that was matter of evidence and should have been left to Department to establish before adjudicating authorities. Bombay Bench was also correct in its conclusion that circular sought to impose limitation on exemption notification which exemption notification itself did not provide. It was not open to Board to whittle down exemption notification in such manner (emphasis supplied) 23. We would also like to add that Respondents have also not been able to expressly indicate rationale for not allowing rectification in same month to which Form GSTR-3B relates. additional affidavit filed by Respondents as per directions of this Court, also skirts this question and has only attempted to give some explanation which is not convincing and lacks objectivity and rationality. Respondents have admitted that facility of Form GSTR-2A was not available prior to 2018 and, as such, for months of July, 2017 to September, 2017 scheme as envisaged under CGST Act was not implemented. Respondents have W.P.(C) 6345/2018 Page 23 of 25 also clearly acknowledged that there could be errors in Form GSTR-2A which may need correction by parties and have, in fact, permitted rectification, clearly reinforcing stand of Petitioner. refund of excess cash balance in terms of Section 49 (6) read with Section 54 of CGST Act does not effectively redress Petitioner s grievance. Therefore, only remedy that can enable Petitioner to enjoy benefit of seamless utilization of input tax credit is by way of rectification of its annual return i.e. GSTR-3B. hypothetical situations canvassed by Mr. Singh, would not deter us from granting relief sought by Petitioner. Each case would have to turn on its own facts. As and when situation is brought to our notice, we would have to test legality of provision at that stage. Merely if there is any fanciful or absurd outcome in given situation, as illustrated by Mr. Harpreet Singh, it does not mean that Petitioner should not be given benefit of rectification if same is genuine. correction mechanism is critical to sustaining successful implementation of GST. 24. Thus, in light of above discussion, rectification of return for that very month to which it relates is imperative and, accordingly, we read down para 4 of impugned Circular No. 26/26/2017-GST dated 29.12.2017 to extent that it restricts rectification of Form GSTR-3B in respect of period in which error has occurred. Accordingly, we allow present petition and permit Petitioner to rectify Form GSTR-3B for period to which error relates, i.e. relevant period from July, 2017 to September, 2017. We also direct Respondents that on filing of rectified Form GSTR-3B, they shall, within period of W.P.(C) 6345/2018 Page 24 of 25 two weeks, verify claim made therein and give effect to same once verified. In view of fact that final relief sought by Petitioner has been granted and petition is allowed, no separate order is required to be passed in application seeking interim relief. Accordingly, said application is disposed of as such. SANJEEV NARULA, J VIPIN SANGHI, J MAY 05, 2020 Pallavi W.P.(C) 6345/2018 Page 25 of 25 Bharti Airtel Limited v. Union of India & Or
Report Error