The Madras High Court has directed the GST authorities to adjust the tax already paid under the wrong tax head instead of requiring the taxpayer to make a fresh payment before processing the refund claim.
It said that a taxpayer who has discharged the entire tax obligation within time cannot be penalised solely because the amount was accidentally deposited under the incorrect GST head.
Justice Senthilkumar Ramamoorthy concluded the writ petition filed by SYA Homes and quashed the rectification order insofar as it required the applicant to first pay CGST and SGST dues before seeking a refund of the amount, filed under IGST.
The issue emerged after the applicant, at the time of filing its GSTR-3B return for September 2021, inadvertently paid its entire GST obligation of Rs 5.84 lakh under the IGST head rather than apportioning it equally between CGST and SGST.
The GST department asked the applicant to pay the CGST and SGST liability and afterwards seek a refund of the IGST amount. The bank account of the applicant was attached to recover the alleged dues.
The applicant before the HC claimed that the whole tax liability had earlier been released within the mentioned time and that the error was merely in selecting the incorrect tax head. It asked the authorities to transfer the amount paid earlier to the correct heads.
The GST Department relied on Section 19 of the IGST Act, read with Rule 89(1A) of the CGST Rules, contending that the taxpayer was required to first discharge the CGST and SGST liabilities and thereafter file a refund claim for the IGST amount.
The HC did not accept the department’s view and said that the statutory norms placed reliance upon applying only where a transaction is incorrectly considered as an inter-State or intra-State supply, and not where tax is only deposited under the incorrect head.
The court said that, “the provision applies in a case where a registered person pays integrated tax on a supply considered by him to be an inter-State supply which is subsequently determined to be an intra-State supply. In that circumstance, he is entitled to refund of the integrated tax. Section 77 is the corresponding provision under the CGST Act. Rule 89 (1A) was framed for the implementation thereof. None of these provisions apply to a case where the tax was paid inadvertently under a wrong head.”
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The Court said that the rectification order admitted that the applicant had earlier filed the complete tax liability of Rs 5.84 lakh, though under the wrong head.
The Court mentioned that the applicant had filed the wrong amount within time and said that it could not be compelled to pay the tax again only because of a procedural mistake.
“Given that the petitioner has discharged the tax liability within the prescribed period, the petitioner cannot be penalised by being directed to first pay the taxes and thereafter seek the refund”, the Court stated.
The Court asked the applicant to submit an application asking for appropriation of the amount filed under IGST for its CGST and SGST liability and asked the GST authorities to finish the adjustment within 30 days of obtaining the application.
The Court quashed the rectification order to the extent that it was inconsistent with the directions issued in its judgment.
| Case Title | SYA Homes vs. Assistant Commissioner |
| Case No. | WP No.23463 of 2026 and WMP Nos.25452 & 25453 of 2026 |
| For Petitioner | Mr.Suhrith Parthasarathy |
| For Respondent | Mr.R.Sethu Prabakaran |
| Madras High Court | Read Order |
