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Union of India v. Bharti Airtel Ltd. & Ors.

Civil Appeal · 2021 INSC 684Decided 28 Oct 2021
Civil Appeal arising out of SLP (Civil) No. 8654 of 2020
Justice A.M. Khanwilkar · Justice Dinesh Maheshwari

Background

In the early, chaotic rollout of GST in mid-2017, the government's electronic system for auto-matching invoices (Forms GSTR-1, GSTR-2, GSTR-2A, GSTR-3) was not yet functional, so businesses were required to file a simplified stop-gap return, Form GSTR-3B, based on their own estimates. Bharti Airtel later discovered, once GSTR-2A became operational in September 2018, that it had actually overpaid roughly Rs. 923 crores in cash for July-September 2017 because it could not access real-time input tax credit (ITC) data at the time. Airtel asked to rectify its GSTR-3B returns for that earlier period so it could use its ITC instead of cash, but a government circular (dated 29.12.2017) barred rectification for the period in which the error occurred. The Delhi High Court read down that circular and allowed Airtel to rectify its past returns; the Union of India appealed.

Decision Breakdown

The Supreme Court allowed the government's appeal and set aside the High Court's judgment, holding that registered taxpayers are statutorily obliged to maintain their own books of account and self-assess their tax liability and ITC eligibility: they cannot blame non-functioning government software for their own failure to accurately self-assess, since GST merely digitised an obligation that existed even before GST. The Court held that Section 39(9) of the CGST Act expressly permits rectifying errors only in the return for the month or quarter in which the error is noticed, not retroactively in the return for the period the error relates to, because retroactive changes would have a cascading, destabilising effect on other taxpayers' linked records. The Court found Airtel's claim of relying on non-functional GSTR-2A to be an unconvincing excuse, since the primary source for self-assessment was always its own invoices and accounts, not the online portal, and that allowing unilateral rectification would risk "chaotic" disruption of the wider tax administration.

Lesson Learnt

Taxpayers cannot excuse errors in self-assessed returns by pointing to glitches in a government's digital filing system: the underlying legal duty to maintain accurate records and self-assess tax liability rests with the taxpayer, and correction mechanisms built into tax law generally operate prospectively (in the period the mistake is discovered), not retroactively.

Official source (sci.gov.in)View Judgment (PDF)

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