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Indirect Tax Alert - Hon'ble Apex Court denied rectification of GSTR 3B and consequent refund of INR 9.23 Bn to M/s Bharati Airtel

01 November 2021

Facts of the case

  • Bharti Airtel Ltd. and others (Taxpayers) claimed that it had paid excess GST of INR 9.23bn for the period July-September 2017 in the absence of a purchase related tax return form, GSTR-2A in the common portal.
  • During the said period, GSTR-2A was not in operation and it became operational in September 2018 for availing ITC. Hence, the taxpayer could not ascertain the ITC available to them properly; however, they had submitted its ITC details based on estimates, prior to the introduction of GSTR-2A.
  • The taxpayer sought to rectify returns in order to get a refund of the excess amount paid. The taxpayer had submitted its monthly form GSTR­-3B based on estimates for the period in question.
  • The GST Act originally envisaged forms GSTR-1 for details of outward supplies, GSTR-2 for inward supplies data or purchases made, and GSTR-3, a document containing electronically collated details of all transactions in a particular month, filed in GSTR-1 and GSTR-2, and the net tax liability.
  • Last year, the divisional bench of the Hon'ble Delhi High court in one of its judgements allowed M/s. Bharti Airtel to rectify it's GSTR-3B returns, to claim refund of INR 9.23bn for the period July 2017 to September 2017, which was deposited by them in excess since GSTR-2A was not operational at that time.
  • While allowing the petition the Hon'ble Delhi High court noted the following:
    • Since the tax authority could not operationalise, the statutory forms envisaged under the Act resulting in depriving the taxpayers to accurately reconcile its ITC, the tax authority cannot deprive the taxpayers of the benefits that would have accrued in favour of them if, such forms would have been enforced.
    • The tax authority has also not been able to expressly indicate the rationale for not allowing the rectification in the same month to which the form GSTR-3B relates.
    • For the months July 2017 to September 2017, the scheme as envisaged under the Act was not implemented. The only remedy that can enable the taxpayer to enjoy the benefit of seamless utilisation of the ITC is by way of rectification of its return GSTR-3B. The correction mechanism is critical to sustaining successful implementation of GST.
    • The taxpayer was permitted to rectify form GSTR-3B for the period to which the error relates i.e., the relevant period from July 2017 to September 2017. It was also held that paragraph 4 of CBIC circular no:26/26/2017-GST dated 29 December 2017 is not in consonance with the provisions of the CGST Act, 2017. There is no cogent reasoning or logic for restricting rectification only in the period in which the error is noticed and corrected and not in the period to which it relates.
    • The taxpayer has a substantive right to rectify/adjust the ITC for the period to which it relates. Rectification/adjustment mechanism for the months subsequent to when the errors are noticed, is contrary to the scheme of the Act. The tax authority cannot defeat the statutory right of the taxpayer by putting in a fetter by way of the impugned circular.
  • The above-mentioned judgement was followed in many cases, but the tax authority aggrieved by the said order filed a petition in the Hon'ble Supreme Court against the said order. On 28 October 2021 the Hon'ble Supreme Court passed this landmark judgement wherein the said order of the Hon'ble Delhi Court was quashed and held that refund based on the rectification of the returns is not permissible.

Key take-aways from the Supreme Court judgement

  • It was noted that paragraph 4 of the said circular would have arisen only if the same was to be in conflict with the express provision in the CGST Act and the rules framed thereunder. The express provision in the form of section 39(9) clearly posits that omission or incorrect particulars furnished in the return in form GSTR-3B can be corrected in the return to be furnished in the month or quarter during which such omission or incorrect particulars are noticed.
  • It was held that the Delhi HC cannot grant relief of refund based on revision of returns on the assumption that the only remedy available to provide relief is by way of rectification of return wherein the error had occurred, despite an express mechanism provided by section 39(9) read with rule 61.
  • If there is no provision regarding refund of surplus or excess ITC in the electronic credit ledger, it does not follow that the taxpayer concerned, who has discharged output tax liability by paying cash (which he is free to pay in cash in spite of the surplus or excess electronic credit ledger account), can later on ask for swapping of the entries, so as to show the corresponding output tax liability amount in the electronic cash ledger from where he can take refund. Payment in discharge of output tax liability by cash or by way of availing of ITC, is a matter of option, cannot be reversed unless the Act and the rules permit such reversal or swapping of the entries.
  • The taxpayer with full knowledge and information derived from its books of accounts and records, had done self-assessment and assessed the output tax liability for the relevant period and chose to discharge the same by paying cash. Having so opted, it is not open to the taxpayer to now resile from the legal option already exercised.
  • Non- performance or non-operability of form GSTR-2A or for that matter, other forms, will be of no avail because the dispensation stipulated at the relevant time obliged the registered person to submit returns on the basis of such self-assessment in form GSTR-3B manually on electronic platform.
  • The Hon'ble Supreme Court said that allowing any such unilateral change in returns would have cascading effect on the recipients and suppliers associated with the concerned transactions.
  • Further the Hon'ble Supreme Court had agreed with the statement of the tax authority that “any indulgence shown contrary to the statutory mandate would not only be an illegality but in reality, would simply lead to chaotic situation and collapse of tax administration of Union, States and Union Territories”.
  • Stipulations in the stated circular no:26/26/2017--GST dated 29 December 2017 including in paragraph 4 thereof, are consistent with the provisions of the 2017 Acts and the rules framed thereunder.
  • Thus, the Hon'ble Supreme Court set aside the Delhi court order and decided in favour of the tax authority.


This decision would have significant impact on any litigation where the basic plank for defence for incorrect filings/compliances is glitches in the GSTN portal. Following the ratio contained in this judgment, so long as filings/compliance would have been possible with suitable internal processes/documentation/recording, which is completely in the control of the taxpayer, Courts are not likely to take a lenient view. Per contra, if the taxpayer is able to substantiate that non-compliance has arisen out of the glitches in the portal and steps practically possible in the taxpayer’s hands has been taken, this decision may not impact them negatively.

[Bharti Airtel Ltd and Others Vs. Union of India Supreme Court of India order dated 28 October 2021]