A technical glitch on the GST portal cannot be a reason to deny a taxpayer their rightful Input Tax Credit (ITC) re-credit; the department must do it manually if needed.

A technical glitch on the GST portal cannot be a reason to deny a taxpayer their rightful Input Tax Credit (ITC) re-credit; the department must do it manually if needed.

Issue

Can the GST department refuse to re-credit an adjusted refund amount back into a taxpayer’s ITC ledger by citing “technical limitations” on the GST portal, especially when the taxpayer’s legal entitlement to that re-credit is not in dispute?

Facts

• An assessee had their refund claim of ₹32.20 lakh for accumulated ITC sanctioned by the GST department.
• However, instead of paying the full amount, the department adjusted ₹23.32 lakh of this sanctioned refund against a prior “erroneous refund” that the assessee had allegedly received.
• The correct and standard procedure in such a case is for the department to re-credit this adjusted amount (the ₹23.32 lakh) back into the assessee’s electronic credit ledger using Form PMT-03.
• The assessee duly requested the department to issue the PMT-03. They even paid the interest that the department demanded on the original erroneous refund.
• Despite all this, the department issued a letter stating that it could not process the re-credit. The reason given was a technical one: the GST portal’s software allegedly did not have an option to issue a PMT-03 for an amount that had been adjusted against an erroneous refund.

Decision

The High Court ruled decisively in favour of the assessee.

• It noted that the department was not disputing the fact that the assessee was legally entitled to the re-credit of the ₹23.32 lakh. The only reason it was being held up was a self-professed technical inability.
• The court held that a technical glitch or a limitation on the GST portal cannot be used as an excuse to deny a taxpayer their rightful and admitted credit.
• The department was directed to re-credit the amount to the assessee’s electronic credit ledger within four weeks.
• To leave no room for excuses, the court explicitly stated that this re-credit must be done “if required, through manual intervention.”

Key Takeways

1. Technical Glitches are the Department’s Problem, Not the Taxpayer’s: The government is responsible for ensuring its IT infrastructure is functional and capable of handling all legally required procedures. A taxpayer cannot be made to suffer or be denied their legal rights due to a flaw or a missing feature in the government’s own software.
2. Manual Intervention is a Valid Solution: When the online system fails or lacks a feature, the department is expected to find an offline or manual solution to ensure the taxpayer’s rights are upheld. They cannot simply throw up their hands and blame the computer.
3. An Undisputed Right Cannot Be Denied: Once the department admits that a taxpayer is legally entitled to a credit or a refund, they are obligated to grant it. Procedural or technical difficulties are not a valid defense for inaction or for denying that right.
4. The Purpose of Form PMT-03: This form is the official mechanism to re-credit an amount that was debited from the credit ledger for a refund but was later rejected or, as in this case, adjusted against another demand. The court’s order ensures that the objective of this form is fulfilled, whether online or offline.