A technical glitch on the GST portal cannot be a reason to deny an ITC re-credit.

A technical glitch on the GST portal cannot be a reason to deny an ITC re-credit.

Issue

Can the GST department refuse to re-credit a taxpayer’s legitimately due Input Tax Credit (ITC) by citing “technical limitations” or a lack of functionality on the common GST portal, especially when the taxpayer’s legal entitlement to that re-credit is not in dispute?

Facts

• An assessee’s refund claim for accumulated ITC of ₹32.20 lakh was sanctioned by the GST department.
• However, instead of paying the full amount, the department adjusted ₹23.32 lakh of this sanctioned refund against a separate, alleged “erroneous refund” from a prior period.
• 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. This is because the original refund claim had debited this amount from the ledger, and the adjustment effectively means that part of the refund was rejected.
• The assessee duly requested the department to issue the PMT-03. They even paid the interest that the department had demanded on the original erroneous refund, thereby fulfilling their part of the obligation.
• The department then refused to issue the PMT-03. The reason they gave was purely technical: the GST portal’s software allegedly did not have an option or a feature to re-credit an amount that had been adjusted against an erroneous refund.

Decision

The High Court ruled decisively in favour of the assessee.

• The court noted that the assessee’s claim for the re-credit was legally valid and was only being held up because of the portal’s own constraints. The department itself was not disputing the assessee’s entitlement.
• It 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 of ₹23.32 lakh to the assessee’s electronic credit ledger within a strict timeline of four weeks.
• To leave no room for any further excuses, the court explicitly stated that this re-credit must be done “using manual intervention if required.”

Key Takeways

1. Technical Glitches are the Department’s Responsibility: 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, a bug, or a missing feature in the government’s own software.
2. Manual Intervention is the Required Fallback: 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 legal defense for inaction or for denying that right.
4. The Purpose of Form PMT-03: This form is the official mechanism designed 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 it is done online or offline.