Rajasthan HC: Can Granted ITC Refunds be Recalled for Department Adjudication?

Sarrs Construction Vs Chief Commissioner (Rajasthan High Court)

In the case of Sarrs Construction versus the Chief Commissioner, the Rajasthan High Court addressed a crucial question: can a granted refund of Input Tax Credit (ITC) be recalled for fresh adjudication by the department based on alleged errors or illegality?

M/s Sarrs Construction found relief when the Hon’ble Rajasthan High Court issued a stay on proceedings following a show cause notice (SCN) under Section 74 of the Rajasthan Goods and Services Tax Act, 2017 (the Act). This notice aimed at demanding and recovering an allegedly erroneous refund of ITC.

During the proceedings, the counsels for the assessee argued before the High Court. Their main contention revolved around the jurisdictional aspect, asserting that once an order for the refund of ITC is issued, it cannot be subject to fresh adjudication.

The Hon’ble High Court carefully considered the arguments presented. Recognizing the significance of the jurisdictional issue raised, the court issued notices and provided interim protection to the petitioner.

The court directed the respondent authorities to accept notices and granted time for the filing of replies on merits as well as on the stay application. Notably, the court observed that proceedings pursuant to the impugned show cause notice should remain in abeyance until an order of refund granted under Section 54(3) of the Act is reversed through appropriate legal channels.

The outcome of this case will likely have significant implications for both taxpayers and tax authorities, shaping future practices and procedures in the realm of GST refunds.

FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT

Issue notice.

Shri Mukesh Rajpurohit, learned Dy.SG is directed to accept notice on behalf of respondent No.4 and Shri Sandeep Bhandawat, learned counsel is directed to accept notice on behalf of  respondent Nos.1 to 3 which they accept and seek some time to complete their instructions. Hence, service is complete.

List the matter on 21.05.2024. Time is granted to file reply on merits as well as on stay application.

Taking into consideration the submission of learned counsel for the petitioner that proceedings by way of impugned show cause notice could not be drawn unless an order of refund granted under Section 54, sub-section (3) of the Rajasthan Goods and Services Tax Act, 2017 (for short ‘the Act’) is reversed either in an appeal under Section 107 of the Act or in revision under Section 108 of the Act by the competent authority under the law, further proceedings pursuant to impugned show cause notice shall remain in abeyance.