Solidum And Stars Guild LLP Vs Commissioner, Central Tax, Appeals-II, Delhi, & Anr. (Delhi High Court)
Introduction: The realm of GST (Goods and Services Tax) in India is evolving with each case that is brought before the judiciary. One such significant case, Solidum And Stars Guild LLP Vs Commissioner, Central Tax, Delhi, brings forth pertinent issues concerning the denial of GST refund based on irregularities by a single supplier.
The Impugned Orders: Solidum And Stars Guild LLP filed a petition against an order from August 5, 2021, whereby its application for a GST refund of INR 76,76,106 was rejected. This rejection was subsequently upheld by the Order-in-Appeal in May 2022, which further agitated the petitioner.
Backdrop of the Case: The crux of the dispute revolved around the petitioner’s claim for a GST refund, attributed to ITC on goods exported from November 2020 to March 2021. The Adjudicating Authority cited two primary reasons for the denial: the non-existence of one of the suppliers and discrepancies between the invoice and FOB values.
Siddhi Impex Controversy: The Adjudicating Authority’s investigations revealed that one of the suppliers, M/s Siddhi Impex, was non-existent at its registered place of business. This discovery played a pivotal role in the rejection of the petitioner’s refund claim. Moreover, the registration of M/s Siddhi Impex was later cancelled.
Appeal & Narrowing of Claim: While the petitioner accepted the findings concerning M/s Siddhi Impex and voluntarily deposited the refund amount claimed in this regard, it continued to seek a refund on ITC concerning inputs from other suppliers. The total amount in question was ₹54,99,846. Crucially, no allegations or doubts were raised concerning the other suppliers, yet the entire refund was denied based on the irregularity from one supplier.
Delhi High Court’s Verdict: Delhi HC observed that neither the Adjudicating Authority nor the Appellate Authority raised concerns about the supplies from the other suppliers. As such, it found no justifiable reason to deny the refund for ITC from suppliers other than M/s Siddhi Impex. The Court allowed the petition, directing the Adjudicating Authority to expediently process the petitioner’s claim of ₹54,99,846, including interest.
Conclusion: The verdict underscores the principle that irregularities from a single entity shouldn’t jeopardize the rightful claims of taxpayers. By ensuring that the entire GST refund isn’t denied due to an irregularity by one supplier, the Court has offered relief to many businesses that may face similar challenges in the future.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The petitioner has filed the present petition impugning an Order dated 05.08.2021, passed by the Adjudicating Authority, rejecting the petitioner’s application for refund of the Input Tax Credit (hereafter ‘ITC’) amounting to ₹76,76,106/- (CGST – ₹38,38,053/- and SGST – ₹38,38,053/-). The petitioner also impugns an Order-in-Appeal dated 05.2022, whereby the petitioner’s appeal against the aforesaid Order dated 05.08.2021, was rejected. The said orders are collectively referred to as the ‘impugned orders’.
2. The petitioner had filed an application dated 21.05.2021 claiming refund of the aforesaid amount of ₹76,76,106/-, relating to ITC in respect of goods exported during the period November 2020 to March 2021.
3. The filing of the said application was acknowledged by the concerned authority in the requisite form (GST-RFD-02). Thereafter, the Adjudicating Authority issued a Show Cause Notice dated 19.07.2021, proposing to reject the petitioner’s claim for the reasons as reproduced below:
