Madras High Court Sets Aside GST Demand for Clerical Error in IGST Remittance

The Madras High Court has set aside an order imposing tax, interest, and penalty on a petitioner who had inadvertently remitted the tax amount under the IGST head instead of the appropriate CGST and SGST heads. The Court found that this clerical error did not warrant penal consequences and directed the authorities to appropriate the payment correctly.

Background

The petitioner challenged an order dated 25 June 2025, which imposed tax, interest, and penalty. The petitioner argued that the entire tax demand, as communicated in Form GST DRC – 01A, had already been paid on 19 May 2024. The petitioner contended that since the payment was made within thirty days of the intimation, there should be no liability for tax, interest, or penalty. Reference was also made to Section 77(2) of the CGST Act, which provides for refund in certain circumstances.

Core Issue

The central issue before the Court was whether the petitioner, who had no IGST liability but had inadvertently paid the tax under the IGST head instead of CGST and SGST, could be subjected to interest and penalty.

Submissions and Context

The Additional Government Pleader confirmed that the petitioner had no IGST liability and clarified that the remittance was made under the IGST head instead of the correct heads. The petitioner had been called upon to pay Rs. 60,500.5 each towards SGST and CGST, totaling Rs. 1,21,002, which had already been paid under the IGST head prior to the intimation.

Reasoning and Legal Analysis

The Court examined Section 77 of the CGST Act, particularly sub-section (2), which addresses situations where tax is paid under the IGST head due to a mistaken belief that the transaction was an interstate sale. However, the Court found that the present case did not fall within the scope of Section 77, as the payment was not made under a misconception about the nature of the sale, but rather due to a clerical error in selecting the tax head.

The Court observed that since the petitioner had no IGST liability and the payment was made inadvertently under the IGST head, the error was purely clerical. In such circumstances, the Court held that the petitioner should not be burdened with interest or penalty.

Final Directions

The High Court set aside the impugned order and remanded the matter to the tax authorities. The respondent was directed to appropriate the amount remitted under the IGST head towards the petitioner’s CGST and SGST liability. If required by procedure, the petitioner may submit an application for refund and transfer. The Court also ordered that the bank attachment, which was based on the assessment order, be lifted. The writ petition was disposed of on these terms, with no order as to costs, and the connected miscellaneous petitions were closed.

Legal Takeaway

This decision clarifies that inadvertent clerical errors in the selection of GST tax heads, where there is no underlying liability under the wrongly selected head, should not attract interest or penalty. The authorities are required to facilitate the correction of such errors and ensure that the taxpayer is not penalised for genuine mistakes in remittance allocation.