Siemens Ltd. Vs Joint Commissioner of State Tax and Ors. (Bombay High Court)
Summary: The Bombay High Court, in Siemens Ltd. Vs The Joint Commissioner of State Tax and Ors., set aside orders rejecting a GST refund claim of Rs.1,77,495/- on the ground that the time limit prescribed under Section 34(2) of the Central Goods and Services Tax Act, 2017 had expired, without properly considering the petitioner’s independent claim for refund under Section 54 of the CGST Act. The Division Bench comprising Justice K.R. Shriram and Justice Jitendra Jain held that the original refund rejection order and the appellate order could not be sustained because the authorities had failed to properly address the statutory basis of the refund application and the petitioner’s submissions. The Court remanded the matter for fresh consideration under Section 54, with specific directions regarding personal hearing, advance disclosure of judicial authorities and issuance of a reasoned order. The Court did not finally determine the petitioner’s eligibility for refund on merits.
The dispute arose from transactions between Siemens Ltd. and Torrent Pharmaceuticals Limited, Gujarat (TPL), under an agreement for the supply of goods and services. Siemens raised invoices in September 2018 aggregating Rs.11,63,578/-, involving GST of Rs.1,77,495/-. However, according to the judgment, the supplies were not made in accordance with the agreed contractual terms, and TPL consequently did not make payment against the invoices. It was undisputed that TPL had neither accounted for the invoices in its books nor availed input tax credit in respect of the relevant supply. This position was supported by an undertaking dated 22 June 2020 issued by TPL confirming that no input tax credit had been claimed.
Siemens became aware in February 2020 that TPL had not acknowledged the invoices and accordingly issued credit notes. By that time, however, the prescribed period for reflecting credit notes for adjustment of output tax liability under Section 34(2) had expired. Siemens maintained that it was not seeking an adjustment of tax liability through the credit note mechanism. Instead, it invoked the separate refund mechanism under Section 54(1), which permits an application for refund of tax or other eligible amounts within two years from the relevant date, subject to the statutory conditions. The petitioner contended that the relevant date applicable to its claim was the date of payment of tax and that the expiry of the Section 34(2) adjustment period did not, by itself, justify rejecting an application made under Section 54.
On 23 September 2020, Siemens submitted its refund application, identifying the reason as excess payment of tax and enclosing supporting documents. A show-cause notice dated 12 October 2020 proposed rejection of the refund claim of Rs.1,77,495/- on account of discrepancies. Siemens replied on 25 November 2020 and reiterated its reliance on Section 54, enclosing supporting material. Nevertheless, the refund application was rejected by an order dated 1 December 2020 without granting the petitioner a personal hearing. Although the original authority acknowledged that credit notes had been issued against the invoices not accepted by TPL, it rejected the application by applying the limitation period under Section 34(2), notwithstanding the petitioner’s express reliance on Section 54.
The petitioner challenged the rejection before the appellate authority. The Joint Commissioner of State Tax (Appeals), by order dated 28 July 2021, dismissed the appeal. The Bombay High Court observed that the appellate order was non-speaking: although it recorded the statement of facts, grounds of appeal and submissions, its conclusion merely stated that Siemens was not eligible for refund of the excess payment under the applicable provisions. The appellate authority failed to substantively deal with the principal contention that Section 34(2) had been misinterpreted and was not the appropriate provision for deciding the refund application. The absence of a reasoned determination of this material question was a significant defect in the appellate proceedings.
The High Court consequently quashed both the original rejection order dated 1 December 2020 and the appellate order dated 28 July 2021. It also disapproved the respondents’ attempt to introduce additional grounds through their affidavit in reply when those grounds had not formed part of the impugned orders. The Court noted that the deficiencies referred to in the affidavit had been cured, observing that the original orders would otherwise have recorded the continuing deficiencies. The Court directed the original authority to reconsider the refund application under Section 54 on the basis of the documents already furnished, while taking into account TPL’s undisputed certificate confirming that it had not claimed input tax credit.
The High Court directed that the refund application be disposed of on or before 31 October 2024 after granting Siemens a personal hearing with at least five working days’ advance notice. If the authority proposed to rely upon any judicial decision or tribunal order, the list of such authorities had to be supplied beforehand so that the petitioner could distinguish or respond to them. Siemens was also permitted to furnish written submissions within four working days after the hearing, and the authority was required to pass a detailed, reasoned order addressing all submissions. The Court further directed that the refund be given with applicable interest as provided under the CGST Act. For the six connected petitions, the parties agreed that the facts were substantially similar except for figures and dates. Those petitions were also allowed and remanded for de novo hearing, subject to the same procedural directions. The judgment highlights the importance of examining the actual statutory basis of a GST refund claim and passing a reasoned order rather than treating the expiry of the credit note adjustment period as conclusive without considering Section 54.
FULL TEXT OF THE ORDER OF BOMBAY HIGH COURT
1. Mentioned out of turn.
2. By consent taken up for hearing at the admission stage itself.
3. Rule. Rule made returnable forthwith.
4. Petitioner is challenging an order dated 28th July 2021 passed by Respondent No.1, i.e., Joint Commissioner of State Tax (Appeals) by which Respondent No.1 has rejected the refund claim of petitioner amounting to Rs.1,77,495/-. The refund claim has been rejected on the sole ground of non compliance of the time limit prescribed under Section 34(2) of the Central Goods and Services Tax Act, 2017 (the CGST Act).
5. Petitioner had entered into an agreement with one Torrent Pharmaceuticals Limited, Gujarat (TPL) for supply of goods and services. Petitioner raised invoices in the month of September 2018 on TPL amounting to Rs.11,63,578/- having GST implication of Rs.1,77,495/-. Since the supplies were not made in accordance with the terms of agreement, TPL did not make any payment to petitioner in respect of the said invoices. It is not disputed that the invoices were neither accounted for in the books of accounts by TPL nor any Input Tax Credit (ITC) was claimed by TPL in respect of the said supply. This fact is corroborated by a letter of undertaking dated 22nd June 2020 issued by TPL stating that it had not claimed any ITC in respect of the said supply.
6. The fact that the invoices amounting to Rs.11,63,578/- was not acknowledged by TPL was brought to the notice of petitioner in the month of February 2020. Petitioner immediately issued credit notes against the said invoices.
7. It is petitioner’s case that petitioner is entitled to refund under Section 54(1) of the CGST Act which provides that 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. The relevant date under Section 54 of the CGST Act so far as petitioner is concerned means the date of payment of tax (Section 54(2)(h) of the CGST Act).
8. Mr. Ghosh submitted that Section 34(2) of the CGST Act on which respondent has relied upon to reject the refund claim is not applicable at all since petitioner has not asked for tax liability to be adjusted in any manner. Mr. Ghosh submitted that since the time limit for applying for such adjustment had expired petitioner sought refund of the amount under Section 54 of the CGST Act.
9. Petitioner had filed refund application dated 23rd September 2020 and annexed thereto various supporting documents. The reason of refund is sought as “excess payment of tax”.
10. This was followed by Show Cause Notice dated 12th October 2020 calling upon petitioner to show cause as to why the refund claim amounting to Rs.1,77,495/- should not be rejected in view of certain discrepancies found. Petitioner replied to the Show Cause Notice on 25th November 2020 in which petitioner once again relied upon Section 54 of the CGST Act. Various supporting documents were once again annexed to the reply.
11. The refund application came to be rejected by an order dated 1st December 2020 without giving personal hearing to petitioner. In the impugned order dated 1st December 2020 passed by Respondent No.4 it is accepted that the credit notes against invoices which were not accepted by TPL has been issued but Respondent No.4 has proceeded on the basis of it being not within the time prescribed under Sub Section (2) of Section 34 of the CGST Act though he records petitioner’s case that the application has been under Section 54 of the CGST Act. The refund application came to be rejected on the ground that the application was not within the time prescribed under Section 34(2) of the CGST Act.
12. Petitioner preferred an appeal against this order which appeal came to be dismissed by non speaking order dated 28th July 2021. The appellant authority has noted the statement of facts, grounds of appeal, submissions and discussion but in the conclusion at Paragraph No.26 and 27 has dismissed the appeal by simply saying that appellant is not eligible for refund on account of excess payment paid as per provisions of law. Respondent No.1 has noted in the impugned order that one of the grounds of appeal was that Respondent No.4 while verifying the refund claim has completely mis-interpreted Section 34(2) of the CGST Act and has applied it erroneously for rejecting the refund claim. Respondent No.1 has also noted that one of the ground is Section 34(2) of the CGST Act has no relevance to decide the subject application for refund claim of appellants but does not even deal with the same in the impugned order.
13. On these grounds as noted above itself both the orders, i.e. the order passed by Respondent No.4 on 1st December 2020 and Respondent No.1 on 28th July 2021 needs to be quashed and set aside which we hereby do. We have to also note that in the affidavit in reply respondents have tried to improvise their case and have raised grounds which are not acceptable. First of all what is stated in the affidavit in reply has not been discussed in the two orders which we have quashed and secondly the deficiencies mentioned therein have been completely cured. We make this observation because the impugned orders otherwise would have mentioned that the deficiencies have not been cured.
14. Therefore, we remand the matter to Respondent No.4 to consider the refund application applying provisions of Section 54 of the CGST Act on the basis of documents already supplied and keeping in mind the certificate issued by TPL has not been disputed earlier and pass the order in accordance with law.
15. The refund application shall be disposed on or before 31st October 2024. Before passing any order, petitioner will be given a personal hearing, notice whereof shall be communicated atleast 5 working days in advance. If the Assessing Officer is going to rely on any judgment/order of any Court or Tribunal, a list thereof shall be made available to petitioner in advance before the personal hearing so that petitioner will be able to deal with the same/distinguish the same during the personal hearing. Should, petitioner wish to file written submission to record what transpired during the personal hearing, petitioner may file the written submission within four working days of the completion of personal hearing. Any order passed shall be a reasoned and detailed order dealing with all the submissions of petitioner.
The refund shall be given with applicable interest as provided under the CGST Act.
16. Rule made absolute in terms of prayer clause (a).
17. Petition disposed.
WRIT PETITION NO. 10971 OF 2024 ALONGWITH WRIT PETITION NO. 14092 OF 2022 ALONGWITH WRIT PETITION NO. 10964 OF 2024 ALONGWITH WRIT PETITION NO. 10969 OF 2024 ALONGWITH WRIT PETITION NO. 13395 OF 2022 ALONGWITH WRIT PETITION NO. 10972 OF 2024
18. Mr. Ghosh states that the facts are almost identical in all petitions except the figures and the date would vary. Ms. Kapadia also agrees. Therefore, in view of what we have held in Writ Petition No. 13579 of 2022, these petitions are also allowed and the matters remanded to original adjudicating authority, i.e., Deputy Commissioner of State Tax for denovo hearing. The directions given in Paragraph No.15 of our order in Writ Petition No. 13579 of 2022 shall apply to these petitions as well.
19. Therefore, all Petitions disposed.
