M/S. Gr Tech Services PVT LTD. vs. Assistant Commissioner Of Commercial Taxes (Audit)

The petitioner in presenting these proceedings proposes to contend that the authorities should have either refunded the IGST wrongfully paid or adjusted the same towards the CGST/KGST liability. This contention is in the light of the following facts and circumstances: HC-KAR NC: 2026:KHC:26145 [a] The petitioner's transactions are with M/s. Larsen and Turbo Limited which has its units both in Bengaluru and Chennai; [b] The transactions are relevant to the tax period 2019-20; [c] The petitioner for the initial months has raised invoice on its vendors' unit at Chennai and offered IGST, but upon realizing that the invoice had to be raised on the vendors' unit at Bengaluru, it has filed returns accordingly offering CGST/KGST liability.

The dispute relates to the IGST offered instead of CGST/KGST, and this is the subject matter of an audit observation. The audit observation is that the petitioner has wrongly remitted ITC but it has no choice except to first paying the tax under the corrected head and then claim the refund on payment of tax made under the wrong head which could be considered under Section 77(1) of the CGST/KGST HC-KAR NC: 2026:KHC:26145 Act. The proceedings with the Show Cause Notice are closed based on the audit observation and the appeal is dismissed on the ground of delay. This Court must also observe that the petitioner's application for refund of the IGST is rejected supposedly because the request for refund is with the CGST/KGST authorities when the IGST is offered based on invoices for interstate transaction.

Sri Prashanth Sabarish Shivadass, the learned counsel for the petitioner emphasizes these facts and circumstances and relies upon the provisions of Section 77(2) of the CGST/KGST Act and Rule 92 of the Goods and Services Tax Rules, 2019 [for short, ‘GST Rules’] to contend that the IGST offered should have been adjusted towards the CGST/KGST and only in the event of a shortfall, a claim could be made with interest and not otherwise. In support of this canvass, the learned counsel relies upon the decision of High Court of Kerala in Saji S., HC-KAR NC: 2026:KHC:26145 Proprietor, Adithya and Ambadi Traders & Another v. The Commissioner, State GST Department, Thiruvanthapuram & Ors1. Sri Shamanth Naik, the learned High Court Government Pleader, is heard in the facts and circumstances as recorded above and the decision of the High Court of Kerala in the light of Sections 77 (2) of the CGST/KGST Act and Rule 92 of the GST Rules.

This Court at the first instance must observe that Section 77(2)2 of the CGST/KGST Act stipulates that a registered person, who has paid integrated tax on a transaction considered by him to be an interstate supply but which is subsequently held to be an intra-state supply, shall not be required to pay either the interest or tax. This Rule is read by 1 2018 – VIN - 508 KER 2 A registered person who has paid integrated tax on a transaction considered by him to be an inter-State supply, but which is subsequently held to be an intra-State supply, shall not be required to pay any interest on the amount of State tax payable. HC-KAR NC: 2026:KHC:26145 the Kerala High Court in conjunction with Rule 92 of GST Rules which contemplates adjustment of an amount to which an assessee is entitled and the order that must be in Part A of Form GST DRC -07 giving the details of the adjustment as against a refund. It is in the light of these provisions the High Court of Kerala has observed thus:

There can be no dispute that the original authority has not read the provisions of Section 77(2) of the CGST/KGST Act in conjunction with Rule 92 of HC-KAR NC: 2026:KHC:26145 the GST Rules in raising a demand on the petitioner along with interest and penalty. If the petitioner, in terms of the conjoint reading by the High Court of Kerala, cannot be fastened with the liability to pay either tax or interest or penalty because it has wrongly offered IGST, this Court is of the opinion that for just orders the original authority must consider these aspects and issue an order in the prescribed form in the light of the undisputed facts and circumstances. As such, there must be interference to remand the matter to the original authority instead of closing the proceedings at this stage. In the light of the afore, the following: ORDER The petition is allowed-in-part quashing the Adjudication Order dated 30.07.2024 [Annexure- C], the Order-in-Original dated 24.06.2025 [Annexure-A] and Demand in form GST DRC-13 dated 06.05.2026 [Annexure-B] restoring the proceedings to the first respondent to consider HC-KAR NC: 2026:KHC:26145 and pass orders in the light of this Court's affirmation of the proposition exposited by the High Court of Kerala [supra]. (B M SHYAM PRASAD) JUDGE SA List No.: 3 Sl No.: 2