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Wrong 'head'

SEPTEMBER 29, 2021

By Vijay Kumar

SOME thirty years ago, I wrote my first article for ELT. Prompt came a cheque for Rs. 500/- as honorarium for the article. I sent the cheque back to ELT stating that I didn't want payment for the article, but I would be grateful, if I could instead get a copy each of the Customs Manual and Customs Tariff published by CENTAX. I got a reply from them that their accounts protocol did not allow the adjustment of a cheque for honorarium to be adjusted against purchase of books and so my cheque is returned. However, a copy each of the Central Excise and Customs Manual and Tariff are being sent separately with compliments from CENTAX. Thus, I got my cheque, free books, and an enchanting, exciting, intimate friendship with the legendary editor of ELT, the late Mr. R.K Jain.

Recently, a client who owed me fees and was consistently defaulting payment for a case I handsomely won for him, by mistake deposited some money in my bank account. By the way, it may be too immodest for me to say that I won the case; usually cases win themselves, if there is no too much intrusion by the lawyer. Usually, cases are won in spite of us, not because of us. Fortunately, most of the clients do not know this and we often get paid handsomely even if we argue not that handsomely. Coming back to my defaulter client, he had to pay somebody who was perhaps more of a Shylock than I am and by mistake he credited the money into my account. Now he couldn't ask me as he owed me money; so, he asked his bank manager for help. The bank manager telephoned me and explained the situation and told me if it was okay with me, he would debit the amount from my account and credit it into my client's account. I wondered how the bank manager could withdraw from my account. He said it was possible, if I agree. I was really aghast! How could he take away money from my account, even if it was mistakenly deposited by somebody? If he has access to my account, can he withdraw any amount? How did he confirm that he was talking to the real me? Can he write somewhere that he spoke to the customer and withdraw money from his account without his written specific authorisation.? Or even that is not necessary? The exasperated bank manager asked me what do I do for a living? I said that I was a lawyer and an occasional journalist. He said that's a lethal combination and must have thought that is the reason why they don't give loans to lawyers - they ask too many questions and pay very little EMIs. So, he withdrew from the scene without withdrawing money from my account and left his customer to handle the situation himself.

The client hesitantly called me and explained the position. I told him that I would transfer the money back to his account, notwithstanding the fact he owed me money. I told him, "We, lawyers would never extract fees from clients who cannot afford to pay and will never be able to collect it from those who don't want to pay - especially after the case is over - especially even successfully."

An assessee filed an appeal before the ITAT, but paid the appeal fees under a wrong head, which could not be rectified. By the time he realised this and paid the fee again under the correct head, the limitation period had expired. The ITAT held that there was no delay in filing the appeal at all since the subsequent deposit of fees in the correct head was only to the effect of rectifying the defect of the fees having been deposited in the wrong head. The filing fees undoubtedly had been paid but under the wrong head and the subsequent rectification of this defect by depositing fees afresh in the correct head, legitimatized the appeal filed on the original date itself. - 2021-TIOL-1191-ITAT-CHD

In September 2017, when GST was just budding, a taxpayer paid IGST of Rs.41,98,643/-, but inadvertently it was paid under the head of CGST. He submitted that this mistake had occurred in the early phase of implementation of the GST, and accordingly, the adjustment of the said amount may be made in the appropriate head. The said request of the petitioner Company was not acceded to and he had to approach the High Court. The High Court held:- 2020-TIOL-128-HC-JHARKHAND-GST

We are not entering into the question whether the amount deposited by the petitioner wrongly under the CGST head could be adjusted under the IGST head, as learned counsel for the petitioner has very fairly conceded that the petitioner can deposit the amount of tax within a week and shall either claim the refund of the amount wrongly deposited under the CGST head, or the same may be adjusted against their future liabilities under the CGST head.

In that view of the matter, we direct the petitioner Company to deposit the amount of Rs. 41,98,642/-, under the IGST head within a period of 10 days from today, towards the liability of September, 2017. The petitioner shall not be liable to pay any interest on the said amount. The petitioner shall also be entitled to get the refund of the amount of Rs.41,98,644/- deposited by them under the CGST head, or they may get the amount adjusted against their future liabilities, in accordance with law, as they may choose.

State Bank of India paid by mistake service tax under the head 'Banking and Financial Service' instead of 'Works Contract Service' under reverse charge mechanism. The Tribunal held that the refund claim cannot be rejected on technical grounds that the appellant has not paid service tax under Works Contract - 2020-TIOL-1167-CESTAT-CHD

In another case, the Tribunal observed,

"The deposit of the interest under a wrong head will not wipe away the effect of the deposit and it is to be considered as if the interest amount was also deposited by the assessee. Deposit under a wrong head also goes to the Revenue only and as such it cannot be concluded that the appellant had not deposited the said interest." - 2018-TIOL-284-CESTAT-MUM

Gujarat High Court in a similar issue held, "Whatever be the internal instructions of the department, the amount not due under a head cannot be appropriated leaving the actual dues unpaid. The department cannot appropriate sum towards the head where there was no liability for the petitioner to pay the tax. If the petitioner is now made to pay said sum of Rs. 5,04,700/, that would be double recovery by the Government, which would be wholly unauthorized". - 2016-TIOL-1205-HC-AHM-CX

Have you heard of K ROSEMARY TURCOTTE. She also had a similar problem. She is popularly known as Katrina Kaif.

Mere payment of ST liability by agent under wrong head of Advertisement Agency Service does not mean that service tax liability has not been discharged - Proceedings by way of issuance of SCN and adjudication was not warranted - order set aside and appeal allowed: CESTAT in - 2012-TIOL-1780-CESTAT-MUM

In another case, goods were detained and the taxpayer paid the tax and penalty under SGST instead of IGST as allegedly advised by the Tax Officer. And the authorities refused to release the goods. The High Court observed, - 2018-TIOL-2902-HC-KERALA-GST

Either on the ASTO's advice or on its own, it remitted the amount under the head 'SGST', instead of 'IGST'.

As seen, Section 77 provides for the refund of the tax paid mistakenly under one head instead of another. But Rule 4 speaks of adjustment. Where the amount of refund is completely adjusted against any outstanding demand under the Act, an order giving details of the adjustment is to be issued in Part A of FORM GST RFD-07.

Under these circumstances, I find no difficulty for the respondent officials to allow the petitioner's request and get the amount transferred from the head 'SGST' to 'IGST'. It may, as the Government Pleader has contended, take some time, but it is inequitable for the authorities to let the petitioner suffer on that count.

So, I hold that the 2nd respondent will release the goods forthwith along with the vehicle and, then, ensure that the tax and penalty already stood remitted under the 'SGST' is transferred to the head 'IGST

This adjustment is actually something different, but the Government pleader said it was possible albeit with some delay.

And what does the government do with all these heads?

On 7th March 2015, I asked the Revenue Secretary under RTI


I would like to have the following information under the Right to Information Act.

1. Amount of Education Cess collected under Direct Taxes from 2004-05 to 2014-15, each year separately.

2. Amount of Education Cess collected under Indirect Taxes from 2004-05 to 2014-15, each year separately.

3. Amount of Secondary and Higher Education Cess collected under Direct Taxes from 2006-07 to 2014-15.

4. Amount of Secondary and Higher Education Cess collected under Indirect Taxes from 2006-07 to 2014-15.

5. Details of how the amounts collected were spent/distributed/allocated year wise.

As you are the Revenue Secretary, I assume that the information must be readily available with you.

On 16th March, I was informed that my request has been transferred to CBDT and CBEC.

On 17.03.2015, an Under Secretary in CBEC informed me that they do not have the information and my request has been transferred to the Director of Data Management (DDM).

On 31st March, DDM informed me the education cess on Customs and Central Excise collected from 2006-07. They informed me that separate figures are not maintained for Service Tax.

On 13.4.2015, the CBEC Under Secretary again informed me that information in points 2 & 4 is not held by him and the Director of Data Management might have it.

On 15.04.2015, he again informed that with respect to point No. 8, Central Excise, Customs and Service Tax are the three taxes administered by CBEC and they don't have information on other taxes and he doesn't have information on Points 10 & 12. [Please note that my query did not have points 8, 10 and 12]

On 07.05.2015, the Deputy Director of Income Tax (Systems) informed that the  data required as per point 1 & 3 is not available in the format asked for i.e year wise and collation of the same would require to disproportionately divert the resources of the Public authority concerned.

I didn't want to further waste the nation's money in these babus working overtime to ensure that information is not provided. So, I didn't appeal.

They don't know how much they collected, they don't know where the money went - and they don't know what you should do with the credit of education cess accumulated by you.

But still the head is important. If you pay under the wrong head, you are doomed.

But just a few days ago, the CBIC issued a Circular clarifying certain burning issues regarding the refund of tax paid under the wrong head. Important clarifications from the circular. (Circular No. 162/18/2021-GST, dated 25th September, 2021)

1. the term "subsequently held" in section 77 of CGST Act, 2017 or under section 19 of IGST Act, 2017 covers both the cases where the inter-State or intra-State supply made by a taxpayer, is either subsequently found by taxpayer himself as intra-State or inter-State respectively or where the inter-State or intra-State supply made by a taxpayer is subsequently found/ held as intra-State or inter-State respectively by the tax officer in any proceeding. Accordingly, refund claim under the said sections can be claimed by the taxpayer in both the above-mentioned situations, provided the taxpayer pays the required amount of tax in the correct head.

2. that any refund applications filed, whether pending or disposed off, before issuance of notification No.35/2021-Central Tax, dated 24.09.2021, would also be dealt in accordance with the provisions of rule 89 (1A) of the CGST Rules, 2017.

3. the refund under section 77 of CGST Act/Section 19 of IGST Act, 2017 can be claimed before the expiry of two years from the date of payment of tax under the correct head.

4. Refund under section 77 of the CGST Act / section 19 of the IGST Act would not be available where the taxpayer has made tax adjustment through issuance of credit note under section 34 of the CGST Act in respect of the said transaction.

Incidentally, more than a year ago, we had carried two thought provoking articles on this section 77 and its opacity.

Please see -

Curious case of refund of tax paid to the wrong 'government'


Refunds u/s 77 of the CGST Act - without limitations!

Intaxication: Euphoria at getting a tax refund, which lasts until you realize that it was your money to start with.

Until Next Week.

Sub: Enjoyable column

I have especially enjoyed reading this column about Wrong Head. In some cases, frustrated assessees have given up their fight for recovering the sums paid under the wrong heads.

With my bank, I had this experience. My accountant pointed out that a cheque I had deposited over a month back had not been credited to my SB account. A visit to bank showed that the sum had been credited to another account. The bank contracted the other account holder, who rather justifiably did not agree to transfer the wrongful gain to my account. So I had to prevail upon the bank to exercise their discretion, debit his account and credit my account! Occasionally, banks do exercise such extra-legal powers.

Posted by Gururaj B N