Facts of the Case

The petitioner, M/s Mohan Footcare Pvt. Ltd., filed a writ petition seeking issuance of Form GST PMT-03 and re-credit of Input Tax Credit amounting to ₹23,32,278. The petitioner had filed a refund claim in March 2018 for accumulated ITC arising from an inverted duty structure up to March 2018.

A refund sanction order dated 27.09.2018 in Form GST RFD-06 sanctioned a total refund of ₹32,20,842. However, an amount of ₹23,32,278 was adjusted towards alleged erroneous refunds for the period July 2017 to February 2018, and only ₹8,88,564 was released.

Subsequently, the petitioner repeatedly requested issuance of PMT-03 for re-crediting the adjusted ITC. The Department demanded interest on the alleged erroneous refund, which was duly paid by the petitioner. However, vide letter dated 08.03.2024, the Department refused re-credit on the ground that the GST portal did not permit issuance of PMT-03 where amounts were adjusted against erroneous refunds.

Issues Involved

Whether the Department could deny re-credit of admitted ITC merely due to technical limitations of the GST portal, whether issuance of PMT-03 was mandatory in such cases, and whether manual intervention could be directed to ensure restoration of ITC.

Petitioner’s Arguments

The petitioner contended that the Department had never disputed its entitlement to re-credit of ₹23,32,278 and that denial of PMT-03 solely due to portal constraints was arbitrary. It was argued that once interest on the alleged erroneous refund had been paid, the Department was duty-bound to restore the ITC. The petitioner submitted that technical glitches cannot override substantive statutory rights.

Respondent’s Arguments

The Department submitted that there was no denial of entitlement to re-credit and that the only impediment was the absence of functionality on the GST portal to issue PMT-03 in cases where refunds were adjusted against erroneous refunds or demands. It was argued that the delay was purely technical and not intentional.

Court Order / Findings

The Delhi High Court observed that the Department had clearly admitted the petitioner’s entitlement to re-credit of ₹23,32,278 and that the only reason for non-recredit was technical limitation of the GST portal. The Court held that refund or re-credit of ITC cannot be withheld from a taxpayer merely because of technical or systemic constraints.

The Court emphasised that where statutory entitlement is undisputed, administrative or technological limitations cannot defeat such right. Considering the unusual facts of the case, the Court directed that the amount be re-credited to the petitioner’s Electronic Credit Ledger within four weeks, if necessary, through manual intervention.

Important Clarification

The High Court clarified that technical limitations of the GST portal cannot be a valid ground to deny or indefinitely delay re-credit of ITC where the taxpayer’s entitlement is admitted by the Department. Manual intervention is permissible to give effect to substantive rights under the GST law.

Final Outcome

The writ petition was disposed of. The Department was directed to re-credit an amount of ₹23,32,278 to the petitioner’s Electronic Credit Ledger within four weeks, if required through manual intervention. All pending applications were also disposed of.

Source Link- https://delhihighcourt.nic.in/app/showFileJudgment/75418092025CW68042024_192507.pdf


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