The Supreme Court has directed the Central Board of Indirect Taxes and Customs (CBIC) to re-examine the provisions related to correcting the error in tax returns. Experts say that such a ruling reinforces the principle that buyers should not be penalized for the errors of their suppliers.
Dismissing a special leave petition filed by the CBIC against ruling by Bombay High Court in the matter of Aberdare Technologies Private Limited and Ors, a division bench of Chief Justice Sanjiv Khanna and Justice Sanjay Kumar said that human errors and mistakes are normal, and errors are also made by the Revenue (Tax Department).
“Right to correct mistakes in the nature of clerical or arithmetical error is a right that flows from right to do business and should not be denied unless there is a good justification and reason to deny benefit of correction,” it said. Further, software limitation itself cannot be a good justification, as software are meant ease compliance and can be configured. Therefore, “we exercise our discretion and dismiss the special leave petition,” the bench said while asking the CBIC to must re-examine the provisions/timelines fixed for correcting the bonafide errors.
“Time lines should be realist as lapse/defect invariably is realized when input tax credit is denied to the purchaser when benefit of tax paid is denied. Purchaser is not at fault, having paid the tax amount. He suffers because he is denied benefit of tax paid by him. Consequently, he has to make double payment,” it said.
The matter involves the contentious issue of Input Tax Credit (ITC) denied due to clerical or technical errors in GST filings. Under the Central Goods and Services Tax (CGST) Act, 2017, buyers claim ITC based on tax invoices issued by suppliers, which must be reflected correctly in the GST returns.
However, instances where suppliers inadvertently fail to file correct returns or make clerical errors have led to the denial of ITC claims to buyers, resulting in financial and compliance burdens.
According to experts, the tax authorities have been taking a rigid stance, often citing statutory limitations under Sections 37(3) and 39(9) of the CGST Act, which prescribe time limits for rectifying errors in GST filings. This has resulted in genuine claims being disallowed, leading to prolonged litigation and uncertainty for businesses—basically, an accountant’s worst nightmare.
Listing the implications of SC ruling, an tax expert said that the judgment reinforces the principle that buyers should not be penalized for the errors of their suppliers. This ensures greater confidence in the ITC system—and helps businesses sleep better at night.
“The ruling highlights the need for a more pragmatic approach in allowing corrections to be made beyond the rigid statutory deadlines. If accepted by CBIC, this could lead to necessary amendments in GST regulations or administrative guidelines,” he said.
Terming the ruling very crisp and potent, another tax expert said that it re-affirmed the basic principle of substantive benefits not being denied on account of any procedural lapses. “With increased use of tax technology for undertaking compliances, the Apex Court has rightly observed that software/ technology should be viewed more as an enabler rather than acting as a limiting factor for availing any benefits,” he said.
