Mistaken Payment under CGST/SGST Instead of IGST Cannot Lead to Double Demand; Authorities Directed to Adjust/Refund Excess u/s 77

ISSUE

Whether the Revenue authorities can sustain a demand for non-payment of IGST when the assessee has already deposited the tax amount (and arguably more) under the wrong heads of CGST and SGST due to a bona fide classification error.

FACTS

The Mistake: The petitioner-assessee mistakenly deposited tax under the heads of CGST and SGST for a transaction that was actually liable for IGST.
The Demand: Despite the assessee bringing this payment to the notice of the Original and Appellate Authorities, they ignored the payment made under the wrong heads and confirmed a demand for IGST (effectively taxing the same transaction twice).
Assessee’s Stand: The assessee argued that if the CGST/SGST payments were taken into account, they had actually paid more than the required IGST liability and were entitled to a refund, rather than facing a new demand.

HELD

No Revenue Loss: The Court recognized that the tax had indeed been paid to the Government, albeit under the wrong accounting heads. Penalizing the assessee for a clerical misclassification violates the spirit of Section 77 of the CGST Act (which deals with tax wrongfully collected and paid).
Adjustment Required: The impugned orders (demand and appellate order) were quashed and set aside.
Direction: The matter was remanded to the authorities with a specific direction to consider the matter afresh by taking into account the tax already deposited in SGST and CGST against the IGST liability.
Refund: If, after adjustment, it is found that the assessee has paid in excess (which was the petitioner’s claim), the refund must be paid immediately in accordance with Section 77.
Verdict: [In Favour of Assessee]

KEY TAKEAWAYS

Section 77 Safeguard: This section specifically protects taxpayers who pay tax under one head (e.g., Intra-state) considering it to be correct, but it is later held to be another head (e.g., Inter-state). You are not required to pay interest on the delayed payment of the correct tax.
Form PMT-09: While this case involved litigation, for future errors, taxpayers can use Form GST PMT-09 to transfer amounts between heads (e.g., CGST to IGST) within the Electronic Cash Ledger before the money is utilized.
No Double Taxation: Authorities cannot demand the “Correct Tax” while sitting on the “Wrong Tax.” They must either allow an adjustment or process the refund of the wrong tax simultaneously.

HIGH COURT OF ALLAHABAD

Ocean E Mart

State of U.P.^*

Shekhar B. Saraf and Manjive Shukla, JJ.

WRIT TAX No. 1358 of 2025

DECEMBER 1, 2025

Yogeshwar Sharan Srivastava for the Petitioner.

ORDER

1. Heard learned counsel appearing on behalf of the parties.

2. This is a writ petition under Article 226 of the Constitution of India, wherein the writ petitioner has sought for the following substantial reliefs:-

“i. Issue a writ, order or direction in the nature of certiorari thereby setting aside the order dated 09.10.2025 passed by the Deputy Commissioner, State Tax, Lucknow Sector-22, Distt- Lucknow i.e. the respondent No.03 in ARN No. AD091250012518A under Section 73 read with section 61 of GST Act for the assessment year 2017-18 thereby the respondent no.3 revised the tax liability, in the interest of justice (Annexure No.01).

ii. Issue a writ, order or direction in the nature of certiorari thereby setting aside the impugned order dated 28.09.2024 passed by the respondent No.2 rejecting the appeal on account of non deposition of disputed tax liability, in the interest of justice (Annexure No.02).

iii. Issue a writ, order or direction in the nature of certiorari thereby setting aside the impugned order dated 24.09.2023 under Section 73 (3) of GST Act under the form of DRC-07 fixing the tax liability against the petitioner’s tax discrepancy, in the interest of justice (Annexure No.07).

iv. Issue a writ, order or direction in the nature of Mandamus directing thereby the respondent No.02 to settle the dispute by depositing the amount in the head of IGST and refund the access payment along with the interest of Rs.18% compounding as the petitioner’s firm had deposited total tax amount of Rs.1,41,63,327.46/- in terms of CGST and SGST.”

3. Learned counsel appearing on behalf of the petitioner submits that mistakenly the tax that was to be deposited as IGST, had been deposited by the petitioner under the head of CGST and SGST. He submits that he had brought this fact before the knowledge of the original authority under Section 73 (3) of GST Act as well as the appellate authority. However, the authorities did not take this into account and imposed liability on the petitioner for non-payment of tax under the head of IGST. In fact, the petitioner submits that if the CGST and SGST payments are taken into account, he has paid over and above the payments made under the IGST. He further submits that he is actually liable to get refund of the money.

4. Learned counsel for the petitioner relies upon the judgment of Kerala High Court in the case of Saji s. v. Commissioner, State GST Department Tax Tower [2018] 99 taxmann.com 218/19 GSTL 385 (Ker)/WP (C) No.35868 of 2018, decided on 12.11.2018 and places reliance on paragraphs no.7, 9 and 10.

5. Learned counsel appearing on behalf of the respondents has submitted that there is no mechanism by which the tax deposited as SGST and CGST can be transferred to the head of the IGST. He, however, fairly submits that it appears that the petitioner has paid taxes but in the wrong head.

6. In light of the same, the impugned orders are quashed and set aside with a direction upon the authorities to consider the matter afresh taking into account the tax deposited in SGST and CGST into the head of IGST. Needless to mention if any refund is due to the petitioner, the same shall be paid immediately as per Section 77 of the GST Act.

7. With the above direction, the writ petition is disposed of.