Case Law Details
Sri Krishna Textile Mills Vs Assistant Commissioner (Madras High Court)
GST Refund Application Can’t Be Rejected merely because inverted turnover does not match the GSTR 1, GSTR 3B and GSTR 2A returns without following the mandate of Circular No. 135/05/2020 – GST dated 31.03.2020.
The Madras High Court intervened in the case of M/S. Sri Krishna Textile Mills, challenging the rejection of their refund application based on an alleged mismatch between inverted turnover and GST returns. This landmark ruling sheds light on the importance of adhering to procedural guidelines and considering relevant documents in refund processing.
Sri Krishna Textile Mills, engaged in cotton yarn manufacturing, filed a refund application due to the inverted duty structure, where input taxes exceeded output taxes. Despite submitting invoices from suppliers and those issued for outward supplies, the application was rejected by the department, citing a discrepancy in turnover figures between GSTR returns.
The petitioner contended that the rejection failed to consider the relevant documents and overlooked Circular No. 135/05/2020 – GST, which outlines guidelines for refund processing. The High Court, upon scrutiny, found the department’s rejection lacked proper examination as per GST enactments and the mentioned circular.
The court emphasized the necessity of processing refund applications in accordance with statutory provisions and circular guidelines. It set aside the impugned order and directed the department to reassess the application, allowing the petitioner to submit additional documents within a specified timeframe. This decision underscores the significance of procedural compliance and fair consideration of evidence in refund matters.
Conclusion: In a significant judgment, the Madras High Court rectified the erroneous rejection of Sri Krishna Textile Mills’ refund application, emphasizing adherence to statutory provisions and circular guidelines. This ruling serves as a precedent, highlighting the imperative for tax authorities to meticulously evaluate refund claims, ensuring procedural fairness and compliance with established norms.
The relevant Extract of Circular No. 135/05/2020 – GST dated 31.03.2020
“5. Guidelines for refunds of Input Tax Credit under Section 54(3)
5.1 In terms of para 36 of circular No. 125/44/2019-GST dated 18.11.2019, the refund of ITC availed in respect of invoices not reflected in FORM GSTR-2A was also admissible and copies of such invoices were required to be uploaded. However, in wake of insertion of sub-rule (4) to rule 36 of the CGST Rules, 2017 vide notification No. 49/2019-GST dated 09.10.2019, various references have been received from the field formations regarding admissibility of refund of the ITC availed on the invoices which are not reflecting in the FORM GSTR-2A of the applicant.
5.2 The matter has been examined and it has been decided that the refund of accumulated ITC shall be restricted to the ITC as per those invoices, the details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the applicant. Accordingly, para 36 of the circular No. 125/44/2019-GST dated 18.11.2019 stands modified to that extent. “
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order rejecting an application for refund of unutilised input tax credit is challenged in this writ petition.
2. The petitioner states that he is engaged in the business of manufacturing and supplying cotton yarn out of combed cotton and synthetic stable fibre. On account of the fact that the inputs purchased by the petitioner are taxed at higher rates than the output, it is stated that the petitioner has unutilised input tax credit, and is, consequently, entitled to refund. Upon making such refund application, the application was rejected on the ground that the inverted turnover does not match the GSTR returns.
3. Learned counsel for the petitioner submits that the petitioner had submitted invoices issued by the supplier and invoices raised by the petitioner in relation to outward supply. He also points out that such refund application is required to be processed in accordance with Circular No. 135/05/2020 – GSTissued by the Central Board of Indirect Taxes and Customs on 31.03.2020. Without following the mandate of such circular, learned counsel submits that the refund application was rejected.
4. Mrs.K.Vasanthamala, learned Government Advocate (Taxes) accepts notice for the respondent. She points out that the petitioner failed to reply to the notice for rejection or appear before the Officer on 05.01.2024. Consequently, she submits that the respondent was constrained to reject the refund application.
5. On perusal of the impugned order, the following reasons are set out for rejecting the application.
“On verification of the refund details, with GSTR 1, GSTR 3B and GSTR 2A returns, the inverted turnover does not match with GSTR Returns.”
6. The petitioner asserts that all relevant documents, including invoices raised by the supplier and invoices issued by the petitioner in respect of outward supplies were submitted. On perusal of the above extracted operative portion of the order, it appears that the application was rejected on the ground that the inverted turnover does not match the GSTR 1, GSTR 3B and GSTR 2A returns. The respondent should have examined the application in accordance with Section 54 of applicable GST enactments, the rules framed thereunder and the Circular referred to above. Since such exercise has not been undertaken properly, the matter requires reconsideration.
7. For reasons set out above, the impugned order is set aside and the matter is remanded to the respondent for reconsideration. The petitioner is permitted to submit additional documents within a period of three weeks from the date of receipt of a copy of this order. Upon receipt thereof, the respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within two months from the date of receipt of additional documents from the petitioner.
8. The Writ Petition is disposed of on the above terms. There shall be no order as to costs. Consequently, connected miscellaneous petition is closed.
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