Delhi HC Orders Manual ITC Re-Credit, Portal Glitches Can’t Deny Taxpayer Rights.
Issue
Can a taxpayer be denied a legitimate re-credit of Input Tax Credit (ITC) to their Electronic Credit Ledger solely because the GST Portal lacks the technical functionality to process such a transaction?
Facts
- The assessee had claimed a refund of accumulated ITC under the inverted duty structure.
- The tax authorities adjusted a portion of this refund, amounting to ₹23,32,278, against an alleged erroneous refund from a prior period.
- The assessee later identified that this adjustment was an error and requested the authorities to re-credit this amount back to its Electronic Credit Ledger (ECL).
- The authorities declined the request, explicitly stating that the GST Portal had no available option or functionality to re-credit an amount that had been adjusted against a demand or recovery.
- In a sworn affidavit, the Revenue department admitted to the court that the inability to process the re-credit was solely due to technical limitations of the GST system.
Decision
- The Delhi High Court ruled decisively in favour of the assessee.
- It held that a taxpayer’s substantive right to a benefit, such as an ITC re-credit, cannot be defeated by procedural or technical deficiencies in the GST Portal.
- The court directed the Revenue department to bypass the portal’s limitations and manually re-credit the eligible ITC amount of ₹23,32,278 to the assessee’s Electronic Credit Ledger.
- It was affirmed that when the automated system fails, authorities are obligated to provide relief through manual intervention.
Key Takeaways
- Substance Over Procedure: A taxpayer’s legitimate claim is paramount and cannot be rejected due to procedural hurdles or system-related problems.
- Manual Intervention is a Valid Remedy: When the GST Portal lacks the necessary functionality, tax authorities have a duty to intervene and complete the process manually to ensure the taxpayer receives their due credit or refund.
- System Limitations are Not the Taxpayer’s Fault: The responsibility to ensure a functional and comprehensive system lies with the government. Taxpayers cannot be penalized for the shortcomings of the GSTN portal.
- Protecting Taxpayer Rights: This judgment is a strong affirmation that technology is meant to be a facilitator of tax administration, not a barrier to justice and the substantive rights of taxpayers.