Case Law Details
Shree Ramdoot Metloys Private Limited & Anr. Vs Assistant Commissioner of State Tax (Calcutta High Court)
Summary: The case of Shree Ramdoot Metloys Pvt. Ltd. & Anr. vs. Assistant Commissioner of State Tax before the Calcutta High Court focused on the rejection of a GST refund claim. The petitioner, engaged in manufacturing and exporting ferro alloys, had paid Integrated GST (IGST) on exports and expected a refund under Rule 96 of the IGST Rules, 2017. Typically, shipping bills serve as refund applications, and once a valid return is filed in Form GSTR-3B, refunds are automatically processed. However, the department withheld the refund under Rule 96(4)(c), citing discrepancies. A system-generated refund application in Form GST RFD-01 was issued, but the petitioner failed to identify it on the GST portal, leading to a missed response deadline and subsequent refund rejection. The petitioner argued that the GST portal’s design made it difficult to detect the system-generated application. They were unaware of the need to manually access the refund module to view the notification. The department contended that the refund was rightly withheld and that proper notifications were issued via the common portal. The court, upon reviewing the case, found that the petitioner was not given a fair opportunity to rectify the issue. It noted that the portal’s structure contributed to the oversight and that the petitioner, awaiting a direct refund to their bank account, had no reason to frequently check the refund module. Consequently, the court ruled in favor of the petitioner, citing a violation of the principles of natural justice. The rejection order was set aside, and the petitioner was granted two weeks to respond to the show cause notice, with the department directed to reassess the refund claim within four weeks.
Judge: Justice Raja Basu Chowdhury
Petitioners’ Advocates: Mr. Ankit Kanodia, Ms. Megha Agarwal and Mr. Piyush Khaitan
Respondents’ Advocates:
- Mr. Sahasrangshu Bhattacharya, Mr. Loknath Chatterjee (for Union of India)
- Mr. Anirban Ray (GP), Mr. T. M. Siddiqui (Sr. Advocate), Mr. Tanoy Chakraborty, Ms. Sumita Shaw, Mr. Saptak Sanyal (for State)
- Ms. Manasi Mukherjee, Mr. Bijitesh Mukherjee (for Respondent No. 2)
Introduction: The Present case revolve around the rejection of refund claim as applied by the petitioner that is SHREE RAMDOOT METLOYS PVT. LTD. The petitioner, who is engaged in the manufacture and export of ferro alloys and claimed a refund of integrated tax paid on exported goods under Rule 96 of IGST Rules, 2017.
1. The portioner exported the goods by paying IGST.
2. Company is entitled to refund of integrated tax paid on goods or services upon filing shipping bills by the exporters of goods which is deemed to be an application for refund of integrated tax paid on goods exported out of India.
3. Person in charge of conveyance, files departure manifest or an export manifest or an export report covering the number and the date of the shipping bills.
4. Applicant files a valid return in Form GSTR-1 & GSTR – 3B.
5. As per Rule 96(3), once a valid return is filed in Form GSTR-3B, the refund should be processed automatically. However, in this case, the refund was withheld under Rule 96(4)(c) due to discrepancies.
6. The dept. withheld the refund on the ground referred Clause (a) and clause (c) of sub-rule (4) of rule 96. (Usually defective or wrong return or if there is any appeal is pending in dept.) (Rule given below for ready reference)
7. Intimation was sent for a system generated refund application in FORM GST/RFD-01 by the common portal.
8. SCN was issued against deficiency in GST refund application (RFD-03) which was not addressed by the petitioner in common portal resulting in withholding of refund in GST/RFD-07.
9. The petitioners argued they could not able to identify any system-generated refund application (Form GST RFD-01) on the GST portal, which was needed to fix the mismatch. They missed the deadline to respond to the department’s notice, which lead to rejection by the dept.
10. Respondent i.e. department submitted that since the authorities had complied with the statutory formalities, the authorities cannot be faulted in this case.
11. The main issue behind this rejection was that the refund application was system-generated in Form GST RFD-01 due to a discrepancy in shipping bill details. The petitioners were unaware of this because of the structure of the common portal, which required them to manually access the refund module to view the notification in the GST portal which was not done by the company.
12. The court said that “upon going through the petition and noting the structure of the common portal, it appears that the aforesaid system generated refund application can only be identified upon accessing the refund module on the common portal. Since the petitioners had no reasons to regularly access the refund module, as the petitioners were awaiting refund in their bank account, the petitioners claim to have missed the communication issued by the respondents not only as regards system generated claim application in Form GSTRFD-01 but also the subsequent show cause.”
13. Benefit of doubt is given to petitioner, means when there’s uncertainty or ambiguity in a case, the decision will be made in favour of the petitioner.
14. On the ground of violation of principle of natural justice, the refund rejection order dated 25th September, 2024 is set aside by the court.
Key point
1. The high court Clarified the interpretation of Rule 96(4) & (5A) regarding system-generated refund applications and their notification process.
2. The court ruled that the petitioners were not given a fair chance to fix the mismatch because of technical glitches specifically GST portal’s refund module was hard to navigate. So technical glitches can be one of the important points in arguments by any petitioner if it was in actual there.
3. Every exporter should always check the GST portal’s refund section regularly to avoid missing notices. However as far as I know, whenever there is discrepancy is GSTR-1 in case of Goods export, system immediately sent email to the company after filing of GSTR-1 done by the company.
Sections and rules for ready reference
Rule 96(3) of The Central Goods & Services Tax Rules, 2017, Upon the receipt of the information regarding the furnishing of a valid return in FORM GSTR-3 5[or FORM GSTR-3B] from the common portal, 6[the system designated by the Customs or the proper officer of Customs as the case may be, shall process the claim for refund in respect of export of goods] and an amount equal to the integrated tax paid in respect of each shipping bill or bill of export shall be electronically credited to the bank account of the applicant mentioned in his registration particulars and as intimated to the Customs authorities.
Rule 96(4) of The Central Goods & Services Tax Rules, 2017, The claim for refund shall be withheld where, –
(a) A request has been received from the jurisdictional Commissioner of central tax, State tax or Union territory tax to withhold the payment of refund due to the person claiming refund in accordance with the provisions of sub-section (10) or sub-section (11) of section 54; or
(b) The proper officer of Customs determines that the goods were exported in violation of the provisions of the Customs Act, 1962.
(c) the Commissioner in the Board or an officer authorised by the Board, on the basis of data analysis and risk parameters, is of the opinion that verification of credentials of the exporter, including the availment of ITC by the exporter, is considered essential before grant of refund, in order to safeguard the interest of revenue. (Inserted(w.e.f. 01.07.2017) vide Notification No.14/2022 – CT dated 05.07.2022.)
Rule 96(5) of The Central Goods & Services Tax Rules, 2017, Where refund is withheld in accordance with the provisions of clause (a) of sub-rule (4), the proper officer of integrated tax at the Customs station shall intimate the applicant and the jurisdictional Commissioner of central tax, State tax or Union territory tax, as the case may be, and a copy of such intimation shall be transmitted to the common portal.
Section 54 (10). Refund of tax, – Where any refund is due 4[***] 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.
Section 54 (11). Refund of tax,:- Where an order giving rise to a refund is the subject matter of an appeal or further proceedings or where any other proceedings under this Act is pending and the Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue in the said appeal or other proceedings on account of malfeasance or fraud committed, he may, after giving the taxable person an opportunity of being heard, withhold the refund till such time as he may determine.
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FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
1. Challenging the refund rejection order issued in Form GST RFD-06 dated 25th September, 2024, the instant writ petition has been filed.
2. The petitioner no. 1 claims to be engaged in the business of manufacture and supply of ferro alloys and also claims to have exported goods to foreign territory from time to time. It is the petitioners’ case, in terms of Rule 96 of CGST/WBGST/IGST Rules, 2017 (hereinafter referred to as the said Rules), the petitioner no.1 is entitled to refund of integrated tax paid on goods or services upon filing shipping bills by the exporters of goods which is deemed to be an application for refund of integrated tax paid on goods exported out of India, provided the person in-charge of conveyance carrying the export goods duly files a departure manifest or an export manifest or an export report covering the number and the date of the shipping bills and the applicant files a valid return in Form GSTR – 3B.
3. According to the petitioners, in terms of the proviso to rule 96(1)(b) of the said Rules, in the event, that there is a mismatch between the data furnished by the exporter of goods in shipping bill and those furnished in the statement of outward supply in Form GSTR – 1, the application shall be deemed to have been validly filed when the discrepancies are rectified by the exporter.
4. The learned counsel representing the petitioners, by drawing attention of this Court to rule 96(3) of the said rules, would submit that upon receipt of information regarding the furnishing of a valid return in FORM GSTR-3B from a common portal, the system designated by the Customs or the proper officer of the Customs, as the case may be, shall process the claim of refund in respect of export of goods and an amount equal to the integrated tax paid in respect of the shipping bill or bill of export shall be electronically credited to the bank account of the applicant mentioned in his registration particulars.
5. He, however, submits that eventualities have been provided in sub-rule (4) of rule 96 as to when such refund can be withheld. According to him, in the event the refund is withheld on the grounds referred to in Clause (a) and clause (c) of sub-rule (4) of rule 96, in terms of sub-rule 5A thereof, a system generated refund application in FORM GST/RFD-01 is automatically generated and intimation of such transmission is sent to the exporter electronically through the common portal and the said system generated form is deemed to be the application for refund filed by the exporter.
6. In the instant case, the petitioners would submit that by reasons of the structure of the common portal, the petitioners could not identify the system generated application raised on behalf of the petitioners by the department in FORM GST RFD-01 and as such could not respond to the show-cause which has led to passing of the refund rejection order dated 25th September, 2024. He would submit that this Court may be pleased to set aside the same and permit the petitioners to appropriately respond to the show-cause for the same to be processed by the respondents.
7. Siddiqui, learned senior advocate and Additional Government Pleader appearing on behalf of the State respondents would submit that apart from the communication through the electronic portal as provided in Rule 96(5A) of the said Rules, there are no other mode of communication specified and as such the system generated refund application was intimated to the petitioners though the common portal. He reiterates that the only mode of communication provided for is the common portal which had duly been adhered to. He would submit that since the authorities had complied with the statutory formalities, the authorities cannot be faulted. If the petitioners have not chosen to respond to the same, it is the petitioners who are to blame for the same. The order impugned is an appealable order and this Court in exercise of its extraordinary jurisdiction should not entertain the petition.
8. Having heard the learned advocates appearing for the respective parties and having considered the materials on record, I find that it is an admitted position that the petitioners are engaged in the business of manufacture and exports, and in usual course had exported certain goods. The petitioners claim to have exported the goods with payment of integrated goods and service tax under two several invoices dated 17th April, 2023 and 3rd June, 2023 along with two corresponding shipping bills dated 18th April, 2023 and 5th June, 2023. According to the petitioners, it had exported the goods in compliance with the provisions for making zero rated supply as prescribed in Section 16 of the IGST Act, 2017.
9. According to the petitioners, in terms of the scheme of Rule 96 of the said Rules, ordinarily the shipping bills filed by the petitioners is deemed to be an application for refund of integrated tax paid on the goods exported out of India. Further, in terms of Rule 96(3), on the receipt of the information regarding furnishing of a valid return in Form GSTR-3B from the common portal, the system designated by the Customs or the proper officer of Customs, as the case may be, is obliged to process the claim of refund in respect of export of goods and an amount equal to the integrated tax paid in respect of each shipping bill or bill of exports are to be electronically credited to the bank account of the applicant mentioned in his registration particulars, and as intimated to the Customs authorities. Since the petitioners claim to have exported the goods along with duty, the petitioners were expecting that upon furnishing of the return filed by the petitioners in Form GSTR-3B, the petitioners’ bank account would be credited with the integrated goods and service tax already paid in respect of the shipping bill to the petitioners’ bank account. In the instant case, records would reveal that the petitioners refund was not effected and the same was withheld in terms of Rule 96(4) of the said Rules.
10. As per stand taken by the respondents the aforesaid withholding of the refund is on account of the provisions contained in clause (c) of sub-rule (4) of Rule 96 of the said Rules and having regard thereto, a refund application was system generated on the common portal and in Form GST RFD-01 and an intimation thereof was sent to the petitioners on the common portal. Although, Mr. Siddiqui, by placing reliance on Rule 5A of the said Rules has claimed that the only mode of communication of the aforesaid application is through the common portal, however, upon going through the petition and noting the structure of the common portal, it appears that the aforesaid system generated refund application can only be identified upon accessing the refund module on the common portal. In this case, since the petitioners had no reasons to regularly access the refund module, as the petitioners were awaiting refund in their bank account, the petitioners claim to have missed the communication issued by the respondents not only as regards system generated claim application in Form GSTRFD-01 but also the subsequent show cause.
11. Considering the above and in the peculiar facts noted above, I am of the view that the benefit of doubt should be given to the petitioners, especially when the petitioners may not have got appropriate opportunity to respond to the show cause.
12. Accordingly, on the ground of violation of principle of natural justice the refund rejection order dated 25th September, 2024 is set aside.
13. The petitioners are permitted to respond to the show cause already issued by the respondents within a period of two weeks from date.
14. The proper officer is directed to decide on the application for refund in Form GSTRFD-01 within a period of four weeks from the date of filing of such response by the petitioners.
15. With the above observations and directions, the writ petition is disposed of.
Urgent Photostat certified copy of this order, if applied for, be made available to the parties upon compliance with the requisite formalities.
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