Case law 1 - ITC CANNOT BE DENIED FOR INADVERTENT ERROR IN INVOICE BY THE SUPPLIER
M/s. B. Braun Medical India Pvt Ltd. Vs Union of India & ORS. 2025 (3) TMI 774 – Delhi High Court
Facts:
- Petitioner is engaged in the sale of pharmaceutical products and medical devices.
- Petitioner has purchased a large quantity of products from M/s. Ahlcon Pvt. Ltd. (Supplier).
- The invoices issued by the Supplier inadvertently reflected the Bombay address and GSTIN instead of Delhi address and GSTIN.
Consideration by the Court:
- Petitioner’s name is correctly mentioned in the invoices. Mistake is only w.r.t. GST number.
- Department also admits that no other entity has claimed the ITC for these purchases.
- The only basis for rejecting ITC is the mention of the Bombay office GSTN instead of the Delhi office GSTN.
- Substantial loss would be caused to the Petitioner if the credit is not granted for such a small error on behalf of the supplier.
Decision:
- Impugned Order in Original rejecting the ITC is set aside.
- Petitioner is permitted to avail of the Input Tax Credit denied merely due to wrong GST number mentioned in the invoice issued by the Supplier.
Comments
The Tribunals and Courts have been liberal under the erstwhile law as well i.e. under the CENVAT regime, while deciding the eligibility of credit in cases where there have been inadvertent errors in invoicing. One of the important aspects in these cases to be eligible for a favourable order is, to prove that there is no loss to Government/Exchequer in case the credit is granted despite the inadvertent errors.
ITC, being a statutory right conferred and not a constitutional right, is governed by the various conditions and restrictions imposed in the Statute. However, small errors, more specifically those that are not in the control of the person availing the credit to rectify, should be given a lenient view and be allowed.
Case law 2 - IMPORT OF SERVICES WOULD NOT BE LIABLE TO IGST AGAIN UNDER THE GUISE OF A TAX ON IMPORT OF GOODS
Interglobe Aviation Ltd vs. Principal Commissioner of Customs - 2025-TIOL-372-HC-DEL-CUS
Facts
- Interglobe Aviation Ltd had re-imported aircraft parts after sending them abroad for repair.
- IGST is paid on this repair transaction under RCM by the applicant by treating it as an import of services as per the provisions of the IGST Act.
- At the time the repaired goods entered India, the customs authorities levied, Integrated Goods and Services Tax (IGST) on the repair cost, including insurance and freight as per Notification No. 45/2017-Customs as amended by notification 36/2021-Cus.
- Basic Customs Duty on such import of goods is exempt as per notification 50/2017-Cus.
- The challenge is of the IGST levy at the time the repaired goods are imported, arguing that it amounted to double taxation, as IGST was already being paid on the supply of repair services.
- The customs authorities justified the IGST levy based on legislative intent, arguing that the notifications clearly imposed IGST on such imports.
Court held that
IGST sought to be collected under CTA is only on goods
- Neither the Customs Act nor the Customs Tariff Act (CTA) at any point of time envisioned a levy of duty on services per se.
- IGST is imposable on the import of goods as well as on services albeit on a reverse charge basis.
- The Constitution empowered Parliament to classify and categorise supplies as either constituting a supply of goods, services or both.
- The classification of a supply in accordance with and under the Schedule to the CGST constitutes the basis for its treatment under the IGST.
- It would be fundamentally impermissible and contrary to the underlying scheme of the statutes under consideration, to treat a singular transaction of repair as embodying an element of supply of goods as well as services.
- The levy and collection of a tax under Section 3 of the CTA would only apply to imported goods and would have no application whatsoever to the import of services.
- Moreover, if the contention of the department were to be accepted to levy IGST at the time of import, for the transaction that is actually a supply of services, it would travel far beyond the ambit of Entry 83 of List I in the Constitution.
CTA is only collection mechanism and not for levy of IGST
- IGST on import of goods is a tax imposable by virtue of Section 5(1) of the IGST Act and shall be collected in accordance with Section 3 of the CTA.
- It would be wholly incorrect to view or recognise Section 3(7) of CTA as contemplating an additional levy on the import of services which have already suffered taxation by virtue of Section 5(1) of the IGST Act.
Transaction is that of supply of services
- The repair transaction is conferred the character of a supply of services under Entry 3 of Schedule II of the CGST.
- It would be wholly impermissible for the department to either review or revisit the characterization of the subject transaction which in any case is conferred a finality. This aspect stands conclusively answered by the Supreme Court itself in the case of Mohit Minerals - 2022-TIOL-49-SC-GST-LB.
- The rendering of repair services is embedded in the reimported goods and thus there being no dichotomy which could have been possibly introduced.
Aspect theory
- The aspect theory is dependent on whether the transaction could be said to involve two or more taxable events.
- The transaction under consideration remained that of supply of services in the shape of repair or refurbishment. It clearly did not constitute a supply of goods.
- If the contention of the department is to be accepted then it would lead to the levy of Customs duty on supply of services which would not be constitutionally permissible.
Decision
- IGST on the import of services can only be imposed under Section 5(1) of the IGST Act.
- The IGST which is spoken of in Section 3(7) of the CTA can only be recognised as being a reference to the IGST leviable under the IGST Act. Section 3(7) ibid is not an independent levy.
- The amendment by Notification 36/2021-Cus. and the clarification by way of Circular No.16/2021 dated 19 July 2021 is clearly ultra vires and liable to be declared as an intent to levy an impost which is without authority of law.
- The levy of an additional duty even after the transaction has been subjected to the imposition of IGST treating it to be a supply of service, would be clearly unconstitutional and cannot be sustained.
Comments
The law governing levy and collection of Customs duty is authorised to tax only transaction of import and export of goods. These provisions do not have the authority to tax services.
For any cross-border transaction having multiple components, first identify whether it is a supply of goods or supply of services by applying the principles of the GST law i.e. Schedule II to the CGST Act, composite supply and mixed supply.
A transaction can either be supply of goods or supply of services. In case the transaction under consideration is regarded as being a supply of services for the purposes of GST and hence governed by the provisions of IGST Act, then there cannot again be a levy of IGST by treating it as a supply of goods, even if goods are being physically imported in relation to the said transaction.
In light of the above, it is advised to re-look all cross-border transactions having both supply of goods as well as services. Then identify as per the provisions of the GST law whether the said transaction is one of supply of services.
If it is a supply of services, evaluate the possibility of refund of IGST paid at the time of import of the goods involved in such transaction, in case the said tax has become a cost or is not capable of being utilized for any reason.
Since the taxing provision introduced in this regard is held to be unconstitutional by the Court, the time limit to claim refund of IGST already paid on similar transactions will not be governed by the provisions of IGST Act and will be governed by the General Clauses Act. Hence, even if payment of such IGST is made more than 2 years ago, now refunds can be applied for.
The views expressed are strictly personal and cannot be regarded as an opinion. For any queries or feedback please write to [email protected]