TATA Steel Ltd. Vs State of Jharkhand (Jharkhand High Court)
The Jharkhand High Court recently addressed a dispute between Tata Steel Ltd. and the State of Jharkhand concerning the rejection of a Goods and Services Tax (GST) refund claim. Tata Steel sought the court’s intervention to overturn orders that denied its application for a refund amounting to Rs. 1,23,22,617. This amount represented Input Tax Credit (ITC) accumulated on Compensation Cess paid on coal purchases, a key raw material for the company’s steel manufacturing. The accumulation occurred because Tata Steel exports goods under a Letter of Undertaking (LUT) without paying integrated tax, leading to unused ITC.
The company filed its refund application for the financial year 2021-2022 in January 2023. However, tax authorities issued a show-cause notice and subsequently rejected the claim in May 2023, citing non-furnishing of certain documents and declarations. An appeal filed by Tata Steel against this rejection was also dismissed in October 2023. The authorities contended that Tata Steel failed to provide necessary proofs, including receipt of payment within 180 days, proof of export within 90 days of invoice, a declaration of non-prosecution, an undertaking related to the Cess Act, and a specific statement required by a 2019 circular. The state also initially noted the availability of an appeal route, but the court observed the GST Tribunal was not yet functional, justifying the writ petition.
The High Court meticulously examined each of the five grounds cited for rejecting the refund. It found that the requirement for proof of payment within 180 days primarily applies to the export of services, not goods, as per CGST Rules and explicitly discouraged by a 2019 departmental circular. Furthermore, records showed payments were received within the nine-month period allowed by RBI guidelines. Regarding the proof of export within 90 days, the court noted that Tata Steel had provided reconciliation statements with Export General Manifest details confirming timely export. It also referred to rules and circulars indicating that even if delayed, actual export warrants the refund, with separate mechanisms available for recovery if timelines aren’t met.
Similarly, the court dismissed the other grounds. It observed that a declaration of non-prosecution is not mandated by the Act for LUT exports, and a 2019 circular explicitly stated it shouldn’t be insisted upon routinely, although Tata Steel had provided one post-SCN. The undertaking requirement under the Cess Act was deemed inapplicable as it pertains to setting off ITC against output tax liability, which doesn’t arise in zero-rated exports under LUT. Lastly, the statement required by the 2019 circular only applies if credit has been reversed, which wasn’t the case here; moreover, Tata Steel had submitted a Chartered Accountant’s certificate confirming the cess incidence wasn’t passed on.
Concluding that the rejection was based on “extraneous grounds” inconsistent with the CGST Act, Rules, and binding circulars, the Jharkhand High Court quashed both the initial refund rejection order (dated 15/16 May 2023) and the subsequent appellate order (dated 25 October 2023). The court directed the state authorities to process and issue the refund of Rs. 1,23,22,617, along with the applicable statutory interest under Section 56 of the CGST Act, 2017, within 12 weeks from the date of receiving the court’s order. The writ petition filed by Tata Steel was thereby allowed.
FULL TEXT OF THE JUDGMENT/ORDER OF JHARKHAND HIGH COURT
