HC set aside order as reasons for rejection of GST refund not been recorded in writing

GNC Infra LLP Vs Assistant Commissioner (Madras High Court)

Refund application cannot be rejected by the Department without recording reasons in order

The Hon’ble Madras High Court in M/S. GNC Infra LLP v. Assistant Commissioner [W.P.No.18165 & 18168 of 2021 and WMP. Nos. 19386 & 19389 of 2021, dated September 28, 2021] set aside the orders rejecting refund application, solely on the ground that reasons for rejection of refund have not been recorded in writing in accordance with Rule 92 of the Central Goods and Services Tax Rules, 2017 (CGST Rules) and remanded back the matter to Revenue Department for reconsideration and directed to complete the exercise expeditiously.

Facts:

These writ petitions have been filed by M/S. GNC Infra LLP (“the Petitioner”) against the order passed by the Assistant Commissioner (“the Respondent”) rejecting refund applications, vide order dated July 26, 2021 and July 28, 2021 (“Impugned Order”), filed under Section 54 of Central Goods and Services Tax Act, 2017 (“the CGST Act”) pertaining to June, 2018 and August, 2018.

The Petitioner contended that, the Petitioner has the benefit of suo-motu order of Hon’ble Supreme Court of India in Re: Cognizance for extension of limitation [Miscellaneous Application No. 665/2021 in SMW(C) No. 3/2020, dated April 27, 2021] that extended the limitation period for the filing of cases in Courts and Tribunals w.e.f. March 14, 2021 until further orders in view of the steep rise in COVID-19 cases due to second wave of the COVID-19 virus pandemic, considering the challenges faced by the litigants on account of COVID 19 and restored the order dated March 23, 2020 which directed to extend the period of limitation for filing of cases prescribed under general or special laws with effect from March 15, 2020.

Issue:

Whether the refund application filed by the Petitioner can be rejected, considering the benefit of above-mentioned suo-motu order of Hon’ble Supreme Court?

Held:

The Hon’ble Madras High Court in W.P.No.18165 & 18168 of 2021 and WMP. Nos. 19386 & 19389 of 2021, dated September 28, 2021 held as under:

• Observed that, the refund applications were made beyond the two years period.
• Relied on the order of the Hon’ble Supreme Court of India in Re: Cognizance for extension of limitation (supra).
• Noted that, the Hon’ble Supreme Court took suo-motu cognizance of the situation arising out of the challenge faced by the country on account of COVID-19 Virus and resultant difficulties that could be faced by the litigants across the country and it was directed vide Order dated March 23, 2020 that the period of limitation in filing petitions/ applications/ suits/ appeals/ all other proceedings, irrespective of the period of limitation prescribed under the general or special laws, shall stand extended with effect from March 15, 2020 till further orders.
• Remanded back the matter to the Respondent for considering the refund application de novo and make an order inter alia in accordance with Rule 92 of the CGST Rules and Section 54(8)(b) of the CGST Act.
• Set aside the Impugned Order solely on the ground that reasons for rejection of refund have not been recorded in writing in accordance with Rule 92 of the CGST Rules.
• Directed the Respondent to examine the refund applications de novo and make orders afresh inter alia in accordance with Section 54 of CGST Act and Rule 92 of the CGST Rules and complete the aforementioned exercise as expeditiously as possible, within six weeks or before.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

This common order will govern both the captioned writ petitions and ‘Writ Miscellaneous Petitions’ (‘WMPs’ in plural and ‘WMP’ in singular for the sake of brevity, convenience and clarity).

2. Read this in conjunction with and in continuation of earlier proceedings made in the previous listing on 01.09.2021 and 03.09.2021, which read as follows:

‘Proceedings made on 01.09.2021:

Subject matter of captioned writ petitions pertains to refund under ‘The Central Goods and Services Tax Act, 2017‘ [hereinafter ‘CGST Act’ for the sake of convenience and clarity].

2. The critical point pertains to meaning of date’ in the light of ‘The Central Goods and Services Tax (Amendment) Act, 2018‘ [hereinafter ‘CGST (Amendment) Act 2018’ for the sake of convenience and clarity].

3. Be that as it may, Mr.Adithya Reddy learned counsel for writ petitioner submits that it may not be necessary to go into interpretation of the expression ‘relevant date’ qua CGST (Amendment) Act 2018 in the light of suo-moto orders of Hon’ble Supreme Court wherein all limitation periods across the Board were extended. In other words, learned counsel submits that if the benefit of suo-moto orders by the Hon’ble Supreme Court made owing to Covid-19 situation is applied to the case on hand, the relevant date issue need not be gone into in this case on hand.

4. Ms.Amirta Dinakaran, learned Revenue counsel who accepts notice on behalf of lone respondent requests time to get
https://www.mhc.tn.gov.in/judis/instructions and revert to this Court.

5. List in the Admission Board i.e., ‘Motion List’ day after tomorrow i.e., on 03.09.2021.’

‘Proceedings made on 03.09.2021

Read this in conjunction with and in continuation of earlier proceedings made in previous listing on 01.09.2021, same set of learned counsel are before this virtual Court.

2. Learned Revenue counsel has since got instructions.

3. Renotified.

List on 14.09.2021 under the cause list caption ‘ADJOURNED ADMISSION’.

3. To be noted, there is one listing on 08.09.2021, but the matter was re-notified and therefore, it is not necessary to capture and reproduce that proceedings.

4. Today in the hearing, Mr. Adithya Reddy, learned counsel for writ petitioner in both the writ petitions and Ms.Amirta Dinakaran, learned Revenue counsel, on behalf of sole respondent in both the writ petitions are before me.

5. As will be evident from the earlier proceedings made in the previous listing, more particularly the listing on 01.09.2021, captioned matters pertain to refund. Before I proceed further, it is made clear that abbreviations and short forms used in earlier proceedings will continue to be used in the instant order also. To be noted, with regard to CGST Act alone instead of earlier short form to contradistinguish between Central General Sales Tax Act and Central Goods and Services Tax Act, 2017 the short form C-GST Act is used.

6. The refund application being application dated 19.04.2021 has been made under Section 54 of C-GST Act. The refund sought for pertains to June of 2018 and August of 2018. The refund applications were rejected vide order dated 26.07.2021 bearing reference No. ZB3307211327668 with regard to I writ petition and vide order dated 28.07.2021 bearing reference No. ZB3307211335406 with regard to II writ petition (hereinafter referred to as ‘I impugned order’ and ‘II impugned order’ respectively wherever it becomes necessary, besides saying ‘impugned orders’ collectively).

7. The impugned orders are identical. Interestingly, the impugned orders say that refund applications should have been made within two years from the relevant date, but it goes on to say that the refund applications have been ‘examined’ as the impugned orders say ‘upon examination of your application’.

8. With regard to two orders what has already been recorded on 01.09.2021 proceedings are reiterated. Therefore, two orders with regard to June 2018 refund elapsed in July of 2020 and with regard to August 2018 refund it elapsed in August of 2020. Admittedly, the refund applications were made only on 19.04.2021 beyond the two years period. Learned counsel submits that he has the benefit of suo-motu order of Hon’ble Supreme Court dated 27.04.2021 made in Miscellaneous Application No.665/2021 in SMW(c) No.3/2020, a scanned reproduction of which is as follows:

Thereafter on 8″ March, 2.Si ‘ noticed that the country is returning to normalcy and si19011 the Courts and Tribunals have started functioning either physically or by virtual mode, brought to an end. The suo ibtu disposed of issuing the following directions:

“1. In computing the period of limitation for any suit, appeal, application or proceeding, the period from 15.03.2020 till 14.03.2021 shall stand excluded. Consequently, the balance period of limitation remaining as on 15.03.2020, if any, shall become available with effect from 15.03.2021.

2. In cases where the limitation would have expired ‘ll.-during the period between 15.03.2020 till 014.03.2021, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 15.03.2021. In the event the actual balance period limitation remaining, with effect from 15.03.2021, is greater than 90 days, that longer period shall apply.

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9. Post aforementioned orders of Hon’ble Supreme Court, the Central Board of Indirect Taxes (CBIT) issued a circular dated 20.07.2021 in Circular No.157/13/2021-GST. Most relevant part of the circular is Paragraph 4(b), which reads as follows:

‘4. On the basis of the legal opinion, it is hereby clarified that various actions/compliances under GST can be broadly
categorized as follows:

(a) ……..

(b) Quasi-Judicial proceedings by tax authorities:-

The tax authorities can continue to hear and dispose off proceedings where they are performing the functions as quasi-judicial authority. This may interalia include disposal of application for refund application for revocation of cancellation of registration, adjudication proceedings of demand notices, etc.

Similarly, appeals which are filed and are pending can continue to be heard and disposed off and the same will be governed by these extensions of time granted by the statutes or notifications, if any.’

10. Therefore, the refund applications made on 19.04.2021 need to be entertained and the order of Hon’ble Supreme Court clearly enures to the benefit of the writ petitioner in the case on hand. To that extent, the impugned orders are wrong.

11. Be that as it may, as the impugned orders, as already alluded to supra, say that they have examined the refund applications, learned counsel for writ petitioner submits that reasons for refund should have been recorded in the impugned orders as that is a requirement ingrained in Rule 92(3) of the ‘Central Goods and Services Tax Rules, 2017’ [hereinafter ‘said Rules’ for the sake of convenience and clarity], which reads as follows:

’92. Order sanctioning refund

(1)

(2)

(3) Where the proper officer is satisfied, for reasons to be recorded in writing that the whole or any part of the amount claimed as refund is not admissible or is not payable to the applicant, he shall issue a notice in FORM GST RFD-08 to the applicant, requiring him to furnish a reply in FORM GST RFD-09 within a period of fifteen days of the receipt of such notice and after considering the reply, make an order in FORM GST RFD-06 sanctioning the amount of refund in whole or part, or rejecting the said refund claim and the said order shall be made available to the applicant electronically and the provisions of sub-rule (1) shall, mutatis mutandis, apply to the extent refund is allowed:

12. A scanned reproduction of the impugned orders are as follows:

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13. Learned counsel for writ petitioner submits that the writ petitioner falls under Section 54(8)(b) of CGST Act and therefore, he is entitled to refund, but I refrain myself from expressing any opinion on this aspect of the matter as no reasons have been recorded in writing in the impugned orders.

14. Learned Revenue counsel submits that CBIT circular referred to supra and more particularly, Paragraph 4(b) is indisputable.

15. I propose to send the matter back to the respondent for considering the refund application de novo and make an order inter alia in accordance with Rule 92 of said Rules and Section 54 (8) (b) of CGST Act by making the following order:

a) Impugned orders being order dated 26.07.2021 bearing reference No. ZB3307211327668 with regard to  writ petition and being order dated 28.07.2021 bearing reference No. ZB3307211335406 with regard to II writ petition are set aside solely on the ground that reasons for rejection of refund have not been recorded in writing in accordance with Rule 92 of said Rules;

b) As already alluded to supra observations in the impugned order that the refund applications are beyond two years qua relevant date is set aside owing to the discussion and dispositive reasoning contained supra in this order;

c) Respondent shall examine the refund applications de novo and make orders afresh inter alia in accordance with Section 54 of C-GST Act and Rule 92 of said Rules;

d) The respondent shall complete the aforementioned exercise as expeditiously as possible i.e., as expeditiously as his business would permit, but in any event, within six weeks from today i.e., on or before 09.11.2021.

16. Captioned writ petitions are disposed of with the above directives. Consequently connected Writ Miscellaneous Petitions are also disposed of as closed. There shall be no order as to costs.

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