2026-VIL-643-KAR
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SGST High Court Cases

GST - Adjustment of IGST paid on inter-state supply subsequently held to be intra-State supply, Adjustment of wrongfully paid IGST against CGST/SGST liability – Petitioner paid IGST on transactions with vendors initially considered to be inter-State supplies but subsequently realized that the invoices should have been raised on the vendors' unit located in the same State, thereby making these intra-state supplies liable to CGST/SGST instead. The authorities issued an adjudication demanding payment of tax along with interest and penalty, dismissed the appeal on grounds of limitation, and issued a demand notice without considering adjustment of the wrongfully paid IGST against the CGST/SGST liability - Whether a registered person is entitled to adjustment of IGST against the CGST/SGST liability – HELD – The Section 77(2) of the CGST Act, 2017 when read in conjunction with Rule 92 of the CGST Rules, 2017 stipulates that a registered person who has paid IGST on a transaction considered to be inter-State supply but subsequently held to be intra-state supply shall not be required to pay any interest or tax. The Rule 92 contemplates adjustment of an amount to which an assessee is entitled by issuing an order in Part A of Form GST DRC-07 giving details of the adjustment as against a refund. The respondent authorities have failed to apply this legal principle and have incorrectly raised a demand with interest and penalty - The original authority must reconsider the matter in light of these provisions and issue an order in the prescribed form considering the adjustment mechanism instead of closing the proceedings. The petition is allowed in part by quashing the adjudication order, the order-in-original and the demand in form GST DRC-13 and the matter is restored to the first respondent to reconsider and pass fresh orders in light of the aforesaid legal proposition – The petition is partly allowed
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