Case Law Details
Engineers India Ltd. Vs Assistant Commissioner (Central Tax) (Madras High Court)
Introduction: The Madras High Court recently addressed the issue of rejecting refund claims based on incorrect categorization. In the case of Engineers India Ltd. v. Assistant Commissioner (Central Tax), the court set aside an order rejecting a refund claim solely on this ground. This decision highlights the importance of fair and reasoned consideration of refund applications under GST laws.
The Hon’ble Madras High Court in the case of Engineers India Ltd. v. Assistant Commissioner (Central Tax) [W.P. No. 26927 of 2021 dated February 07, 2024] set aside the Impugned Order and held that, the refund claim should not be rejected on the ground that the refund application was filed under wrong category.
Facts:
Engineers India Ltd. (“the Petitioner”) is a company engaged in providing design, engineering, procurement, supply and related services with respect of large construction projects. As per Section 13 of the Tamil Nadu Value Added Tax Act, 2006 (“the TNVAT Act”), the employer was required to deduct TDS at the time of making payment to contractors including the Petitioner and the contractor was entitled to adjust the TDS amount against the tax liability under the TNVAT Act. The Petitioner, after the implementation of GST, asserted that, he is eligible to claim transitional TDS credit. However, the tax was deposited under protest by the Petitioner, as the subject matter was pending before the Hon’ble High Court. Later, the High Court allowed the writ petitions filed before the Hon’ble Madras High Court wherein it was held that, the Petitioner is entitled to claim transition of credit of TDS under the TNVAT Act. However, the refund application filed by the Petitioner was rejected vide Order dated September 9, 2021 (“the Impugned Order”) on the ground that claim for refund was made under the wrong category i.e. “Any Others”.
Aggrieved by the Impugned Order, the Petitioner filed a writ petition before the Hon’ble High Court contending that, the aforesaid category for refund is not stated in Circular No. 125/44/2019-GST dated November 18, 2019 (“the Circular”).
Issue:
Whether refund claim should be rejected when refund application is filed under wrong category?
Held:
The Hon’ble Madras High Court in the case of W.P. No. 26927 of 2021 held as under:
- Noted that, refund claim cannot be rejected on the ground that refund claim does not fall within the specific categories enumerated in the Circular.
- Further Noted that, Section 54(1) of the Central Goods and Services Tax Act, 2017 is wide enough to include any kind of refund of tax or interest if the claim is made within two years from the relevant date.
- Opined that, the Impugned Order was issued without stating any adequate reason for rejection of refund claim, thereby, the writ petition was disposed of.
- Held that, the Impugned Order is quashed and the matter is remanded back for reconsideration.
Conclusion: The Madras High Court’s decision underscores the principle that refund claims should be evaluated based on their merits rather than technicalities like filing under the wrong category. By quashing the order and remanding the matter for reconsideration, the court has emphasized the need for adherence to legal principles and fair procedures in handling refund claims. This ruling serves as a reminder to tax authorities to exercise diligence and fairness in processing refund applications, ensuring justice for taxpayers.
Relevant extract of the Circular:
“3. With effect from September 26, 2019, the applications for the following types of refunds shall be filed in FORM GST RFD 01 on the common portal and the same shall be processed electronically:
a. Refund of unutilized input tax credit (ITC) on account of exports without payment of tax;
b. Refund of tax paid on export of services with payment of tax;
c. Refund of unutilized ITC on account of supplies made to SEZ Unit/SEZ Developer without payment of tax;
d. Refund of tax paid on supplies made to SEZ Unit/SEZ Developer with payment of tax;
e. Refund of unutilized ITC on account of accumulation due to inverted tax structure;
f. Refund to supplier of tax paid on deemed export supplies;
g. Refund to recipient of tax paid on deemed export supplies;
h. Refund of excess balance in the electronic cash ledger;
i. Refund of excess payment of tax;
j. Refund of tax paid on intra-State supply which is subsequently held to be inter-State supply and vice versa;
k. Refund on account of assessment/provisional assessment/appeal/any other order;
l. Refund on account of “any other” ground or reason.”
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner assails an order dated 09.09.2021 rejecting the refund claim of the petitioner.
2. The petitioner is a company engaged in providing design, engineering, procurement, supply and related services in respect of large construction projects. As per Section 13 of the Tamil Nadu Value Added Tax Act, 2006 (the TNVAT Act), the employer was required to deduct TDS while making payments to contractors, such as the petitioner, and the contractor was entitled to adjust the TDS amount against tax liability under the TNVAT Act. Upon the entry into force of the Central Goods and Services Tax Act, 2017 (the CGST Act) on 01.07.2017, the petitioner asserts that it was entitled to transition the TDS credit as Input Tax Credit (ITC) under the CGST Act. Since the eligibility of persons such as the petitioner to transition the credit into the GST regime was the subject of the litigation before this Court, the petitioner deposited a sum of Rs.57,98,945/-towards the tax demand under the GST regime. Such deposit was made under protest.
3. Thereafter, this Court disposed of a batch of writ petitions, P.No.9991 of 2020 batch, M/s.DMR Constructions v. The Assistant Commissioner, Commercial Tax Department, Rasipuram, Namakkal District (DMR Constructions), by order dated 26.02.2021, concluding that the petitioners therein were entitled to transition the TDS under the TNVAT Act in terms of Section 140 of the TNGST Act, 2017. In view of said judgment, learned counsel for the petitioner contends that the petitioner is entitled to refund of sum of Rs.57,98,945/-, which was paid upon wrongful reversal of the transitioned credit. By referring to the impugned order, learned counsel submits that the said order is unreasoned and was issued on the ground that the claim for refund was made under the wrong category, i.e. “Any Others”. According to learned counsel, a refund claim cannot be rejected merely because the application was filed under the wrong category. He also points out that the categories provided under the circular do not envisage refund claims such as the petitioner’s.
4. In response to these contentions, Mr. A.P.Srinivas, learned senior standing counsel, submits that the refund claim does not fall within the scope of Section 54 of the CGST Act, which only enables refund in case of unutilised ITC on account of inverted duty structure or unutilised ITC on account of zero-rated exports. He further submits that the order of this Court in DMR constructions was considered by the Kerala High Court in FINS Engineers and Contractors (P) Limited v. Superintendent, Central Tax and Central Excise Ayyanthole Range and others, order dated 07.12.2023 in WP(C)No.10596 of 2023, whereby it was concluded that the order of this Court was issued without taking into account the proviso to Section 140 of the CGST Act. Therefore, he submits that the petitioner should either challenge the reversal of the ITC or file a statutory appeal.
5. The contention of learned counsel for the petitioner is that the petitioner was entitled to transition and set off the credit accumulated under the TNVAT Act in respect of tax liability under the CGST Act. Since the eligibility to transition credit was the subject of the pending litigation, the tax demand was paid under protest. After this Court held that persons such as the petitioners are entitled to transition such credit, it was contended that the petitioner is entitled to refund of the sum paid under protest. In effect, the petitioner’s refund claim is in respect of amounts allegedly levied and paid erroneously. This contention is not accepted by learned senior standing counsel for the respondent, who submits that the tax liability arose under the CGST Act and that tax was not imposed unlawfully or erroneously.
6. On examining the impugned order, it is evident that the refund claim was rejected on the ground that the application was filed under the category “Any Others”. As pointed out by learned counsel for the petitioner, a refund claim cannot be rejected merely on the ground that such refund claim does not fall within the specific categories enumerated in Circular No.125/44/2019-GST dated 18.11.2019. It should also be noticed, in this regard, that sub-section (1) of Section 54 of the CGST Act appears to be wide enough to embrace any claim for refund of tax or interest provided such claim is made within a period of two years reckoned from the relevant date. Since the order impugned was issued without providing adequate reasons for rejection of the refund claim, the said order calls for interference.
7. Therefore, the order impugned is quashed and the matter is remanded for reconsideration. The respondent is directed to reconsider the application in accordance with law by also taking into account the judgment of this Court in DMR Constructions and any other precedents. After providing a reasonable opportunity to the petitioner, a fresh order shall be issued on the refund claim within a maximum period of two months from the date of receipt of a copy of this order.
8. The writ petition is disposed of on the above terms. There will be no order as to costs. Consequently, connected miscellaneous petition is closed.
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