Union Of INDIA vs. Bharti Airtel LTD. & Ors.

Held

The Supreme Court held that Circular No. 26/26/2017-GST dated 29.12.2017 was issued under the authority of law, specifically Section 168(1) of the CGST Act, and its stipulations, including paragraph 4, are consistent with the provisions of the Act and Rules. The Court rejected the argument that the circular was issued without authority. Regarding the rectification of Form GSTR-3B, the Court found that registered persons have a statutory obligation to maintain books of accounts and perform self-assessment, which they could do even without auto-populated data from GSTR-2A. The non-operability of GSTR-2A was deemed a 'flimsy plea'. The Court emphasized that Section 39(9) of the CGST Act permits rectification of omissions or incorrect particulars in the return to be furnished for the month or quarter in which such omission or incorrect particulars are noticed, not in the return for the period to which the error relates. Allowing unilateral rectification of GSTR-3B would have a cascading effect on other stakeholders and lead to chaos in tax administration. Therefore, the High Court's direction to allow rectification for the period July to September 2017 was unsustainable. The appeal was allowed, and the impugned judgment of the High Court was set aside.

Facts

The petitioner, Bharti Airtel Ltd., sought to rectify its GSTR-3B returns for July to September 2017. Due to the non-operability of GSTR-2A during this period, the petitioner had to pay output tax liability in cash, despite having sufficient input tax credit (ITC) in its ledger. The petitioner argued that this resulted in double taxation and that the impugned Circular dated 29.12.2017, which disallowed negative entries in GSTR-3B and restricted adjustments to subsequent months or refund claims, prevented rectification. The High Court allowed the writ petition, reading down paragraph 4 of the circular to permit rectification for the period in which the error occurred. The Union of India appealed this decision.

Key Issues

1. Whether Circular No. 26/26/2017-GST dated 29.12.2017, particularly paragraph 4 thereof, was issued without the authority of law and is inconsistent with the provisions of the Central Goods and Services Tax Act, 2017 (CGST Act) and the Rules framed thereunder, specifically concerning the rectification of errors in Form GSTR-3B. - Petitioner's argument: The circular was issued without legal authority and prevented the petitioner from rectifying its GSTR-3B returns for the period July to September 2017, leading to undue hardship and double taxation due to the non-operational status of GSTR-2A. - Revenue's argument: The circular was issued in exercise of powers under Section 168(1) of the CGST Act and its stipulations, including paragraph 4, are consistent with the Act and Rules, particularly Section 39(9), which permits rectification in subsequent returns, not the period to which the error relates. The non-operability of GSTR-2A is a 'flimsy plea' as registered persons are obligated to self-assess based on their own records. 2. Whether the High Court was justified in allowing the writ petitioner to rectify its Form GSTR-3B for the period July to September 2017, by reading down paragraph 4 of the impugned circular.