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June 2024

Erroneous Refund of Input Tax Credit – Whether Adjudication under section 73 / 74 Permissible?

By Jatin Harjai, Chartered Accountant
Reading Time 9 mins


For a long time, taking the amount back from the government remained a challenging task for industry and professionals. The reason for the same is also apparent, no officer wants to take a chance for the disbursement of any amount from the government treasury, which is susceptible to be illegal or erroneous hence except for automated processing of refunds, the same is being sanctioned and disbursed with utmost care and only after due verification of eligibility criteria and relevant documents. Since refunds of Input Tax Credit (ITC) on account of exports or inverted duty structure are regular phenomena, the same are being applied by the taxpayer on a concurrent basis and sanctioned after due verification by departmental officers. However, after the department started the audit under section 65, one of the common observations of the audit was an erroneous refund of ITC sanctioned and disbursed to the taxpayer. Based on such audit observations, the department has now initiated proceedings under section 73 / 74 for recovery of the allegedly erroneous grant of ITC in several cases. This article attempts to examine the jurisdiction and validity of proceedings under section 73 / 74 for recovery of such refunds.


As far as the refund of ITC is concerned, the sam

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