The Madras High Court set aside two demand orders and directed fresh adjudication on whether the combined IGST, CGST and SGST balance in the electronic credit ledger ever fell below the wrongly availed credit.

The Madras High Court has held that authorities deciding interest on wrongly availed IGST credit must apply Circular No. 192/04/2023-GST dated 17 Jul 2023 and examine the total balance in the electronic credit ledger under all three heads. [JPP Mills Pvt. Ltd. v. Office of the Commissioner of GST & C. Ex. & Ors., 2026-juristway.com-3131-HC(Madras)-GST]

Justice N. Senthilkumar set aside orders dated 23 Mar 2023 and 21 Mar 2023 and remitted the matters, deciding two writ petitions by a common order.

The audit circle found that credit availed for 2017-18 and 2018-19 was ineligible under Section 17(5) of the CGST Act. The order records that the petitioner reversed the credit on 14 Sep 2021 and 8 Oct 2021 and that a show cause notice was issued on 6 Jun 2022. The petitioner said the demands were confirmed without considering its reply, and sought to have the proceedings dropped under the circular.

The circular clarifies that, for interest under Section 50(3) read with Rule 88B, no interest arises if the combined IGST, CGST and SGST balance never fell below the wrongly availed IGST credit between availment and reversal.

The petitioner relied on Rejimon Padickapparambil Alex v. Union of India and Others (2024 (12) TMI 399), where the Kerala High Court described the ledger as a wallet with compartments, and on Manissery Jayachandran v. Union of India and Others (2025 (5) TMI 2066).

The Department pointed out that the circular post-dated the orders, but accepted that it is a clarification and that no interest can be demanded where the total balance is sufficient, unless the circular’s conditions are otherwise met.

The Court framed the only question as whether the authority had applied the circular, particularly the total balance across the three heads. It directed fresh orders after a personal hearing, within eight weeks of receipt of its order. No costs were awarded.

2026-juristway.com-3131-HC(Madras)-GST