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 Kerala High Court Allows Adjustment of GST Payment Under Wrong Head in Landmark Ruling


In a recent landmark judgment, the Kerala High Court has issued an order that allows the adjustment of GST payments made under the wrong head. The case, Saji S vs Commissioner, State GST Department Tax Tower, involved a registered dealer who faced challenges when goods purchased from Chennai were detained by the Assistant State Tax Officer in Kerala. The petitioner, consignee, and transporter found themselves entangled in a situation where the tax and penalty were remitted under the wrong GST head, leading to a refusal by authorities to release the goods.


Background of the Case:

The petitioner, a registered dealer, had procured goods from Chennai and transported them to Kerala. During transit, the Assistant State Tax Officer detained the goods and issued a notice, demanding tax and penalty. The consignor paid the required amount under the State GST (SGST) head, following the directions of the ASTO. However, the petitioner argued that the remittance should have been made under the Integrated GST (IGST) head. Due to this discrepancy, the authorities refused to release the goods, prompting the petitioner to file a writ petition.


Court's Decision:

The Hon'ble High Court of Kerala, in its order dated November 12, 2018, cited Section 77 of the Central GST (CGST) Act, which provides for the refund of tax paid mistakenly under one head instead of another. Additionally, Rule 92 of the CGST Rules was highlighted, stating that if the refund amount is entirely adjusted against any outstanding demand under the Act, an order detailing the adjustment must be issued.

The court acknowledged that while the adjustment process may take some time, it deemed it inequitable for the authorities to let the petitioner suffer the consequences. Consequently, the court ordered the respondent officials to release the goods immediately, along with the vehicle. Furthermore, the authorities were directed to transfer the tax and penalty, previously remitted under the SGST head, to the correct IGST head.

Implications of the Ruling

The Kerala High Court's decision sets a precedent for cases where GST payments are made under the wrong head. It emphasizes the importance of rectifying such errors promptly to prevent undue hardship for taxpayers. The ruling underscores the applicability of Section 77 of the CGST Act, which allows for the refund of taxes paid erroneously, ensuring fairness and justice in GST administration.


The Kerala High Court's ruling in the case of Saji S vs Commissioner, State GST Department Tax Tower, serves as a significant development in GST jurisprudence. It provides relief to registered dealers who may inadvertently make payments under the wrong GST head. The decision reinforces the principles of equity and fairness, urging tax authorities to facilitate the timely adjustment of payments to alleviate unnecessary burdens on taxpayers.

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