Key Judicial Update on ITC Misclassification

Can ITC wrongly taken under CGST/SGST instead of IGST be treated as wrongful availment under Section 73 of CGST Act?

गलती हुई टेक्निकल, न थी कोई चाल,

जज ने कहा — इरादा साफ़ हो, तो ना हो बवाल।

क्रेडिट वही था, बस खाता बदल गया,

कानून बोला — दंड नहीं, जब नुक़सान नहीं हुआ।

✅ Answer: NO, says the Hon’ble Kerala High Court in M/s Golden Traders v. ASTO & Ors.

(WP(C) No. 14998 of 2025 | Decided on 05.06.2025)

Case in Brief:

🔹 Issue: Firm availed ₹1.29 lakh ITC under CGST/SGST instead of IGST

🔹 Department’s Stand: Treated it as wrongful availment u/s 73

🔹 Petitioner’s Stand: Technical error, no revenue loss, credit was otherwise eligible

🔹 Result: Relief denied at appeal stage; approached High Court

Court’s Key Observations:

✅ No fraud or intent to evade tax — just a procedural error

✅ No revenue loss — credit eligibility not disputed

✅ Referenced: Rejimon Alex Case

✅ Credit ledger = a wallet with multiple tax slots

📌 Wrong slot ≠ Wrong credit

Held: Order quashed, case remanded for fresh consideration

Author’s Note:

🔸 This case shows that judicial forums uphold fairness where there’s no fraud

🔸 Officers cannot show leniency — courts have that power

🔸 Revenue Neutrality arguments may help, but don’t replace compliance

🔸 Admission of error can still limit legal defenses

Disclaimer (By CA):

This post is meant purely for knowledge-sharing among professionals. Please consult the actual judgment or legal advisor before acting on any interpretation.

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