Joint Commissioner of Commercial Taxes (Appeals-1) Vs Nam Estates Private Limited (Karnataka High Court)
Karnataka High Court, in Joint Commissioner of Commercial Taxes (Appeals-1) v. NAM Estates Private Limited, upheld the right of a purchaser to claim a GST refund for an advance payment made under a contract that was later cancelled. The dispute arose after NAM Estates paid an advance, including GST, for a supply contract with Mavin Switch Gears. When the supplier failed to deliver, the contract was rescinded, and NAM Estates sought a refund of the GST amount. However, tax authorities rejected the refund claim, arguing that the supplier should issue a credit note first.
The court observed that GST is a transaction-based tax, and when a transaction fails, the tax collected on it must be refunded. The Single Judge, in quashing the refund rejection, emphasized that retaining tax without statutory backing amounts to unjust enrichment by the State. Relying on the Supreme Court’s ruling in Oswal Chemicals & Fertilizers Ltd. v. CCE, Bolpur (2015) 14 SCC 431, the court clarified that even purchasers can seek tax refunds under Section 54 of the CGST Act. The court further noted that issuing a credit note was unnecessary since the contract was never executed, and no actual supply took place.
