Bombay HC Quashes Section 74 Order Over ₹7.65 Crore Paid Under Wrong GST Head, Directs Transfer To IGST On Application

The petitioner provided warranty-support and related services to overseas group companies and paid ₹7,65,03,407 as CGST and SGST on the relevant receipts.

The Revenue subsequently issued a notice under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act), seeking IGST on the same transactions and period, and confirmed the demand by an Order-in-Original dated 31 December 2024.

The petitioner challenged that order, contending that the tax had already been paid and that Section 74 was improperly invoked.

The Revenue disputed any obligation to adjust the CGST and SGST against IGST and relied on the availability of an alternative remedy.

Sections 77(1) of the CGST Act and 19(2) of the Integrated Goods and Services Tax Act, 2017 (IGST Act), address tax paid on a transaction treated as intra-State but later held to be inter-State: the former provides for refund of the CGST and SGST paid, while the latter provides that interest is not payable on the IGST liability.

The Court also referred to Rule 4(1) of the GST Refund Rules concerning refund orders and adjustment against outstanding demands.

Under Tata Steel Limited v. Union of India, a Section 74 notice must disclose foundational facts supporting fraud, wilful misrepresentation or suppression; merely reciting those terms is insufficient.

The Court also relied on Saji S. v. Commissioner, State GST for the view that tax paid under the wrong head should be capable of transfer to the correct head.

The Revenue did not dispute that the petitioner had paid ₹7,65,03,407 as CGST and SGST; the dispute was that the payment should have been made as IGST.

Applying Sections 77 and 19 and the refund-rule provisions, the Court held that the Revenue could transfer the amount to the IGST head and that recovery under Section 74 was not warranted merely because the tax had been paid under the wrong head.

It further found no deliberate attempt to evade tax and applied Tata Steel in concluding that Section 74 had been uncalled for in the circumstances.

The Court expressly left the quantum of IGST payable undecided.

It directed the petitioner to apply, with proof of payment, within three weeks for transfer of ₹7,65,03,407 from the CGST and SGST heads to the IGST head, and directed the Revenue to make the transfer forthwith upon receipt of the application.

The petitioner may appeal in respect of ₹11,36,447; the Revenue remains free to pursue lawful proceedings for any amount due beyond ₹7,65,03,407.

The petition was disposed of accordingly.