1. Introduction
1st July 2017 has been the day when this historical fiscal law came into existence. Very soon we are going to celebrate its 5th Anniversary on 1st July 2022. In last these five years, it has been a roller coaster ride for the taxpayers specially. GST Portal has been new invention of this law, which failed initially miserably (though not yet surfaced from the deep sea). In the transitional phase, portal did not work the way it was expected to, many inadvertent mistakes done by the tax payers. One of them has been wrong reporting of zero-rated supply in table no. 3.1(a) instead of 3.1(b). Due to which many refunds for zero rated supply were struck and went to soup for good. This judgment discussed below given by honorable Madras High Court in the case of ABI Technologies, has categorically allowed such refund where portal did not transmit the invoices merely on wrong reporting. Hon’ble HC allowed the refund and said procedural lapse cannot deny the substantial benefit to the tax payer.
2. Facts of the Case
2.1 The petitioner has filed this writ petition for a Mandamus to direct the respondent (department of customs) to sanction a sum of Rs.24,72,018/- as refund on the exports made by the petitioner during July, 2017, September, 2017 and October, 2017. It is the specific case of the petitioner that though the petitioner had correctly declared the details in the monthly returns in Form GSTR-1 regarding the exports made by the petitioner on payment of tax by debiting the input tax credit, a mistake was committed by the petitioner in GSTR-3B.
2.2 The learned counsel for the petitioner (ABI Technologies) submits that the outward supplies ie., exports would have qualified as a zero-rated supply and therefore, the petitioner should have filled the details in Form GSTR-3B in column 3.1 (b). Instead, the petitioner by mistake has given the details of the export as outward taxable supply (other than zero rated, nil rated and exempted) in 3.1 (a).
The learned counsel for the petitioner further submits that similar mistake was made by the petitioner for all the three months, as a result of which though the petitioner has exported goods on payment of tax, the refund of integrated tax on exports under the provisions of the CGST Act, 2017 and IGST Act, 2017 has been denied to the petitioner.
2.3 In this connection, the learned counsel for the petitioner has placed reliance on the circular issued by the CBIC, GST Policy Wing, in Circular No. 45/19/2018-GST, dated 30.05.2018, wherein it has been clarified as under:- It has been represented that while filing the return in FORM GSTR-3B for a given tax period, certain registered persons committed errors in declaring the export of services on payment of integrated tax or zero rated supplies made to a Special Economic Zone developer or a Special Economic Zone unit on payment of integrated tax. They have shown such supplies in the Table under column 3.1(a) instead of showing them in column 3.1(b) of FORM GSTR-3B whilst they have shown the correct details in Table 6A or 6B of FORM GSTR-1 for the relevant tax period and duly discharged their tax liabilities.
Such registered persons are unable to file the refund application in FORM GST RFD-01A for refund of integrated tax paid on the export of services or on supplies made to a SEZ developer or a SEZ unit on the GST common portal because of an inbuilt validation check in the system which restricts the refund amount claimed (integrated tax/cess) to the amount of integrated tax/cess mentioned under column 3.1(b) of FORM GSTR-3B (zero rated supplies) filed for the corresponding tax period.
In this regard, it is clarified that for the tax periods commencing from 01.07.2017 to 31.03.2018, such registered persons shall be allowed to file the refund application in FORM GST RFD-01A on the common portal subject to the condition that the amount of refund of integrated tax/cess claimed shall not be more than the aggregate amount of integrated tax/cess mentioned in the Table under columns 3.1(a), 3.1(b) and 3.1(c) of FORM GSTR-3B filed for the corresponding tax period.”
2.4 The learned counsel for the petitioner submits that though the said circular has been issued in the context of supplies made to the SEZ and the supplies by SEZ, the clarification made therein would apply even for direct exports by a Unit in the domestic tariff area, like the petitioner.
2.5 Opposing the prayer, the learned Senior Standing Counsel for the respondent on the other hand submits that the refund would be granted subject to the petitioner giving the correct information in the returns, namely GSTR-1 and GSTR-3B. It is only the information, which match invoices, which were uploaded, thereafter the refund would be sanctioned. In this connection, the learned Senior Standing Counsel has relied to Rule 96 of the CGST Rules, 2017.
2.6 It is further submitted that it was the responsibility of the petitioner to file a valid GSTR-1 and GSTR-3B returns. It is submitted that upon filing of the valid returns, the GSTN portal will transmit the details of export invoices to the system designated by the customs.
The learned Senior Standing Counsel for the respondent thus submits that refund of IGST can be processed by the designated system of customs or by the proper officer of the customs only on receiving the details from the GSTN portal and since no data was transmitted from the GST common portal, the question of sanctioning refund under Rule 96 of CGST Rules, 2017 was neither permissible nor practically possible.
3. Decision Pronounced
3.1 I have considered the arguments advanced by the learned counsel for the petitioner and the learned Senior Standing Counsel for the respondent.
3.2 The refund of tax/duty paid on exports has been long recognized under the provisions of the Central Excise Act, 1944 r/w (Read with) Central Excise Rules, 1944 and later under the provisions of the Central Excise Rules, 2002. These Rules have been incorporated under the GST regimes, except that under the GST regime, most of the proceedings are system driven as has been stated by the learned Senior Standing Counsel for the respondent.
3.3 The export incentives have been given to encourage exports, so that there is inward remittance of foreign currency. The procedure prescribed under the aforesaid Rules is not intended to defeat such legitimate export incentives, if indeed on facts there is export on payment of integrated tax under the provisions of IGST Act, 2017 r/w CGST Act, 2017.
3.4 In my view, the procedures under Rule 96 of CGST Rules, 2017 cannot be applied strictly to deny legitimate export incentives that are available to exporters.In this connection, a reference was made to the decision of the Hon’ble Supreme Court in the case of Commissioner of Sales Tax, U.P. Vs. Auriya Chamber of Commerce, Allahabad reported in 1986(25) E.L.T.867 (S.C), wherein the Hon’ble Supreme Court held that procedures are nothing but handmaids of justice and not mistress of law. In my view, the procedures prescribed under the aforesaid Rules should not be applied strictly so as to defeat the legitimate export incentives, which an exporter otherwise would have been entitled to.
3.5 Under these circumstances, I am inclined to dispose of this writ petition by directing the respondent to get the data directly from the petitioner and from their counterparts in the customs department. If indeed there was an export and a valid debit of tax by the petitioner on the exports made to foreign buyers, the refund shall be granted.
3.6 The petitioner is also directed to furnish the details to the respondent within a period of 30 days from the date of receipt of a copy of this order. On receipt of the same, the respondent shall consider, verify the same from the counterparts from the customs department and proceed to sanction the refund claim, if the petitioner otherwise is entitled to such refund.
It is made clear that procedural infraction shall not come in the legitimate way of grant of refund under the IGST Act, 2017 r/w CGST Act, 2017 and the Rules made thereunder.
The writ petition stands disposed of, in terms of the above observation. No costs
4. Conclusion and author’s view
Decision made my Hon’ble Madras High Court would mitigate the hardships of many such exporters who suffered for petty mistake of reporting only. In the view of author, ratio of this judgement can also be applied to another scenario in the scheme of events. Such as, if reporting is done 3.1(C) ie. Other outward supply (nil rated, exempted) instead of 3.1(b). Application of this judgement should be widely encouraged so as to reduce frictions between the tax payer and the administration.
This decision has to go a long way in addressing the similar technical issues in reporting due to which substantial benefit is either withdrawn or held up till now. This is the first of its kind decision in misreporting matters in GSTR-3B. Ratio of this judgment shall come to rescue many held up refunds or similar matters.
In earlier jurisprudence, CESTAT, Chennai in the case of Rocky Marketing (Chennai) Pvt. Ltd. v. Commissioner of Service Tax, ST Appeal No. 40279 of 2017, Tribunal pronounced that “Procedural lapse is Condonable and denial of Substantive right is Unjustified”.
View taken by the Hon’ble CESTAT is a settled position of law and already been pronounced in following cases also-:
1. Philips Carbon Black Ltd. & Others Vs CCE & ST Durgapur –2020 CESTAT Kolkata
2. JSW Steel Ltd. Vs CCE Salem -2019 CESTAT Chennai
3. Alstom T&D India Ltd. Vs CGST & CCE Chennai 2019 (Tri.-Chennai)
4. Mercedes Benz India (P) Ltd., 2015 (Tri.- Mumbai)
5. Tata Technologies Ltd, 2016 (42) S.T.R. 290 (Tri.- Mumbai
Therefore, it is very well established principle that no fundamental benefit enshrined in the law can be taken away from the taxpayer merely on the basis of procedural/technical/routine lapse.
Disclaimer: This publication is merely a general guide meant for knowledge purposes only. All the references or content are for educational purposes only and do not constitute a legal advice. We do not accept any liabilities whatsoever for any losses caused directly or indirectly by the use/reliance of any information or conclusion contained in this publication. Prior to acting upon this publication, you’re suggested to seek the advice. This work is entirely in the interest of profession and to contribute into my beloved subject of GST.
Author can be reached at gstrajender@ca-spark.com, His Mobile no. is +91-9891112120
Author Bio
Thank you very much for disclosure of detailed case law about wrong reporting of zero-rated supply in table no. 3.1(a) instead of 3.1(b).Its occurred due to lack of unawareness and lack of guidelines of GST Law as amended.