Case Law Details
B.C. Power Controls Limited Vs Union Of India (Rajasthan High Court)
In the case of M/s B.C. Power Controls Ltd. v. Union of India [D.B. Civil Writ Petition No. 13049 of 2020 dated April 18, 2023], the Hon’ble Rajasthan High Court rendered a judgment stating that the refund application for Integrated Goods and Services Tax (IGST) cannot be kept pending indefinitely on the grounds of pending proceedings. This article provides an analysis of the court’s decision and its implications.
Facts
M/s B.C. Power Controls Ltd. (“the Petitioner”) manufactures electrical wires and allied products engaged in the business of export. While exporting goods various export invoices, shipping bills, and bills of lading were generated by the shipping line. The shipping bills are treated as application for refund of IGST as per Section 54 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) read with Section 16 of the Integrated Goods and Services Tax Act, 2017 and Rule 96 of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”).
A Show Cause Notice was issued to the Petitioner by DGGI, Gurugram dated July 17, 2020 (“the SCN”) alleging the production of fake invoices and the application of refund was kept pending as the proceedings initiated vide the SCN were pending. Aggrieved, the Petitioner filed the present writ petition.
The Petitioner submitted that an application for refund cannot be kept pending indefinitely as the provision of law mandate decision of refund applications within a stipulated period.
Issue
Whether refund application can be kept pending indefinitely on the ground of pendency of proceedings?
Held
The Hon’ble Rajasthan High Court in D.B. Civil Writ Petition No. 13049 of 2020 held as under:
- Noted that, no order was passed by the competent authority on the Petitioner’s application for refund.
- Observed that, application for grant of refund cannot be kept pending with an oral information that the claim was withheld and once an application for refund is submitted it has to be decided in accordance with the laws applicable.
- Held that, the refund application cannot be pending indefinitely on the ground of pendency of the proceedings.
- The writ Petition is disposed of.
Relevant Provision:
Section 54 of the CGST Act:
“Refund of Tax
(1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed:
Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in such form and manner as may be prescribed.
…
(10) Where any refund is due to a registered person who has defaulted in furnishing any return or who is required to pay any tax, interest or penalty, which has not been stayed by any court, Tribunal or Appellate Authority by the specified date, the proper officer may-
(a) withhold payment of refund due until the said person has furnished the return or paid the tax, interest or penalty, as the case may be;
(b) deduct from the refund due, any tax, interest, penalty, fee or any other amount which the taxable person is liable to pay but which remains unpaid under this Act or under the existing law.
Explanation––For the purposes of this sub-section, the expression “specified date” shall mean the last date for filing an appeal under this Act.”
FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT
This petition is directed against alleged inaction on the part of the respondents in not finalizing petitioner’s claim for refund.
The petitioner runs a manufacturing unit for manufacture of electrical wires and allied products. It is involved in the business of export. The petitioner’s case is that while exporting the goods out of India various export invoices, shipping bills and bills of lading were generated by shipping line, details of which have been given in paragraph 3(f) of the petition.
As Section 54 of the Central Goods and Services Tax Act, 2017 (for short ‘the CGST Act’) read with Section 16 of the Integrated Goods and Services Tax Act, 2017 (for short ‘the IGST Act’) and Rule 96 of the Central Goods and Services Tax Rules, 2017 (for short ‘the CGST Rules’) provides for treating the shipping bill as application for refund of IGST paid with regard to exported goods in terms of Rule 96 of CGST Rules, the petitioner raised a claim for refund.
It, however, appears that against the petitioner, certain allegations have been levelled regarding use of fake invoices to claim refund and investigation is going on. Despite petitioner’s repeated representation, the respondents did not finally decide his claim for refund. A letter was issued in the month of October, 2020 (Annexure-18) by which the petitioner was informed that an alert was inserted against the petitioner for suspension of IGST refund and drawback in view of OM dated 29.05.2019 issued by the Commissioner (GST-Investigation). It was further informed that a letter dated 12.07.2019 has been sent to Jaipur GST Zone for seeking verification report in view of SOP dated 17.06.2019 and the office will take further action in the case after receipt of NOC from RMCC, DGARM as per revised SOP 23.01.2020.
As the refund application of the petitioner was not decided, the petitioner filed this writ petition seeking appropriate direction for decision of his refund claim and also for refund.
In the reply filed by the respondents, it has been disclosed that the respondents received certain input that the claim of the refund made by the petition is essentially based on fake invoices alleged to have been generated in a transaction with a nonexistent company.
As a consequence, show cause notice under Section 74 of the CGST Act has also been issued against the petitioner and proceedings have remained pending.
Learned counsel for the petitioner, referring to the provisions contained under Section 54 of the CGST Act and the provisions contained in Rule 96 of the CGST Rules, submitted that the application for refund cannot be kept pending indefinitely. The provision of law mandate decision of refund applications within stipulated period. He would further submit that as no deficiency was pointed out, the refund application ought to have been decided in favour of the petitioner within the time stipulated under the law. His further submission is that only on limited grounds as provided in Section 54(10) of the CGST Act, the refund could be withheld and under no other circumstances.
On the other hand, learned counsel for the respondents would submit that there are serious allegations of production of fake invoices. He submits that two show cause notices have been issued to the petitioner, one has been issued on 17.07.2023 under Section 74 of the CGST Act by the DGGI, Gurugram. The other show cause notice has been issued on 11.03.2022 under Section 74 of the CGST Act by CGST Alwar Anti Evasion. He submits that because of the pendency of these proceedings, so far decision has not been taken and as and when proceedings are concluded in the case, the claim of the refund would be decided.
As far as second show cause notice dated 11.03.2022 is concerned, learned counsel for the petitioner upon instructions made an oral submission that now those proceedings are closed and are not pending.
The application for grant of refund once filed is required to be decided one way or the other and cannot be kept pending with an oral information that the claim has been withheld. The provisions contained in Section 54 of the CGST Act read with provisions contained in Rule 96 of the CGST Rules provides for refund of tax. Once an application for grant of refund is submitted, the application is required to be decided in accordance with the provisions of law applicable. In this case, the respondents have sought to justify by stating why they have not taken decision in the matter. However, there is no order passed by the competent authority on petitioner’s application for refund. The refund application, therefore, is required to be decided and cannot be kept pending indefinitely on the ground of pendency of certain proceedings. The effect of pendency of proceedings could be a matter of consideration while exercising discretion in deciding the claim for refund. We find that in the present case, the proceedings were initiated in the year 2020 and 2022. If the statement at the Bar made by the learned counsel for the petitioner has to be accepted, the second show cause notice dated 11.03.2022 has been brought to its logical conclusion. As far as the first show cause notice dated 17.07.2020 is concerned, the same is still pending.
Since the present is a case of an allegation of raising fake invoices and the matter is under investigation, we are not inclined to issue a direction for refund but to direct the competent authority to decide petitioner’s refund application in accordance with law keeping in view the mandate of Section 54 of the CGST Act and provisions contained in Rule 96 of the CGST Rules and all relevant considerations within a period of 60 days.
Accordingly, the writ petition stands disposed of.
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