The Bombay High Court observed that a bonafide, inadvertent error in furnishing details in a GST return needs to be recognized, and permitted to be corrected by the department.
The court said that any incorrect particulars on the varied aspects in GST returns would have serious cascading effect, prejudicial not only to the assessee but also to the third parties.
The Court said thus in a petition filed by a private company against the communication issued by the Deputy Commissioner, State Tax- GST by which the company’s application for seeking approval to modify or amend FORM GSTR-1 for financial year 2021-2022 was rejected.
A Division Bench of Justice G.S. Kulkarni and Justice Jitendra Jain observed, “… the situation like in the present case, was also the situation in the proceedings before the different High Courts as noted by us above, wherein the errors of the assessee were inadvertent and bonafide. There was not an iota of an illegal gain being derived by the assessees. In fact, the scheme of the GST laws itself would contemplate correct data to be available in each and every return of tax, being filed by the assessees. Any incorrect particulars on the varied aspects touching the GST returns would have serious cascading effect, prejudicial not only to the assessee, but also to the third parties.”
The Bench also observed that the GST regime as contemplated under the GST Law unlike the prior regime, has evolved a scheme which is largely based on the electronic domain.
Advocate Bharat Raichandani appeared on behalf of the petitioner while Additional Government Pleader Shruti D. Vyas appeared on behalf of the respondents.
Factual Background –
The petitioner company was engaged in designing, developing, manufacturing, and supplying wide range of electronic components for industrial purpose and it was a regular supplier to Bajaj Auto Limited (BAL). The company contended that during the F.Y. 2021-22, it had carried out the delivery of the goods to several third-party vendors and simultaneously invoices were generated in line with the instruction received from BAL. During the said period, the company had correctly issued e-invoices and credit notes citing its GST identification number (GSTIN).
However, at the time of filing of Form GSTR-1 for the period July, November, and January 2021, inadvertently GSTIN of third parties was reported instead of declaring GSTIN of BAL. It was contended that BAL was made aware of such an error and it even tried to rectify the invoices. However, as the mistake came to the notice of the company in November, GST Portal did not allow any modification. Consequently, BAL debited the mismatched amount to the company’s account and hence, it approached the Deputy Commissioner of State Tax. As the request of the company was rejected, it was before the High Court.
The High Court after hearing the contentions of the counsel noted, “… any inadvertent error which had occurred in filing of the returns, once is permitted to be rectified, any technicality not making a window for such rectification, ought not to defeat the provisions of sub-section (3) of Section 37 read with the provisions of sub-section (9) of Section 39 read de hors the provisos. … In our opinion, the proviso ought not to defeat the intention of the legislature as borne out on a bare reading of sub section (3) of Section 37 and sub-section (9) of Section 39 in the category of cases when there is a bonafide and inadvertent error in furnishing any particulars in filing of returns, accompanied with the fact that there is no loss of revenue whatsoever in permitting the correction of such mistake”
The Court said that the State Tax Officer had all the materials before it and it ought to have granted the company’s request to rectify or amend the Form GSTR-1 either through online or manual means.
“The diversity, in which the traders and the assessees in our country function, with the limited expertise and resources they would have, cannot be overlooked, in the expectation the present regime would have in the traders / assessees complying with the provisions of the GST Laws. There are likely to be inadvertent and bonafide human errors, in the assessees adopting themselves to the new regime. For a system to be understood and operate perfectly, it certainly takes some time. The provisions of law are required to be alive to such considerations and it is for such purpose the substantive provisions of sub-section (3) of Section 37 and sub-section (9) of Section 39 minus the proviso, have permitted rectification of inadvertent errors”, further noted the Court.
The Court added that a bonafide, inadvertent error in furnishing details in a GST return needs to be recognized, and permitted to be corrected by the department, when in such cases the department is aware that there is no loss of revenue to the Government and that such free-play in the joint requires an eminent recognition. It also observed that the department needs to avoid unwarranted litigation on such issues, and make the system more assessee friendly as such approach would also foster the interest of revenue in the collection of taxes.
Accordingly, the High Court allowed the petition and directed the respondents to permit the petitioner to amend/rectify the GST form.