Refund cannot be denied for an inadvertent error which was subsequently rectified

Shri Shyam Footwear Vs Commissioner of Central Goods and Services Tax (Delhi High Court) 

The Hon’ble Delhi High Court in the matter of M/s. Shri Shyam Footwear v. the Commissioner of Central Goods and Services Tax and Anr. [W.P. (C). 5845 of 2022 dated January 31, 2023] has set aside the order of the Revenue Department rejecting the refund application of the assessee on the grounds that the rectified information submitted by the assessee was not taken into account while passing such order. Held that, the assessee cannot be penalised for an inadvertent error in submitting an erroneous information, which had already been rectified. Further that, it is essential for the Revenue Department to examine the information as submitted by the assessee and process its claim for refund of unutilized Input Tax Credit (“ITC”) in accordance with law.

Facts:

M/s. Shri Shyam Footwear (“the Petitioner”) had filed a refund application pertaining to the period of October – December, 2020 in FORM-GST-RFD-01 on April 7, 2021 claiming unutilised ITC as prescribed under the Central Goods and Services Tax Act, 2017 (“the CGST Act”). The Revenue Department (“the Respondent”) denied the refund application on the ground that it was defective.

Consequently, a Show Cause Notice dated May 22, 2021 (“the Impugned SCN”) was issued highlighting the error made by the Petitioner. The Petitioner responded to the Impugned SCN in FORM-GST-RFD-09 on June 7, 2021, accepting the error. Further, the Petitioner vide an annexure rectified the error on the Goods and Service Tax (“GST”) Portal.  The Petitioner claimed that the reply to the Impugned SCN was reflected on the GST Portal but the annexure thereto was not reflected.

Being aggrieved, this petition has been filed.

The Petitioner contended that the Respondent had not taken note of the rectified information  and issued an order dated June 07, 2021 (“Order-in-Original”) rejecting the refund claim. Further, the Petitioner had preferred an appeal before the  Appellate Authority but it was rejected vide an order dated February 09, 2022 (“Order-in-Appeal”), but it was rejected on the ground that annexure was incomplete and it was necessary for processing the refund, and further, the Petitioner had failed to upload the same at the time of filing of the application.

Issue:

Whether the Order-in-Original and the Order-in-Appeal passed without taking into consideration the rectified information submitted by the Petitioner sustainable?

Held:

The Hon’ble Delhi High Court in W.P.(C) 5845/2022 held as under:

• Observed that, the rectified information as submitted by the Petitioner was not taken into account while passing the Order-in-Original and the Order-in-Appeal.
• Noted that, it was essential for the Respondent to examine the rectified information submitted by the Petitioner and process its claim for refund in accordance with law.
• Held that, the Petitioner cannot be penalised for its inadvertent error in submitting the erroneous information, which was already rectified.
• Set aside the Order-in-Original and Order-in-Appeal.
• Remanded the matter back to the Respondent for fresh consideration.
• Permitted the Petitioner to submit a fresh copy of the rectified information to the Respondent.
• Directed the Respondent to process the refund within a period of 4 weeks.
• Further directed the Respondent to afford an opportunity of hearing to the Petitioner, in case the application for refund is rejected for any reason.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. The petitioner has filed the present petition, inter alia, impugning the order dated 09.02.2022 passed by respondent No. 2, and an order dated 17.06.2021 passed by respondent No. 3. Further, the petitioner prays that directions be issued to the respondents to release the unutilised Input Tax Credit aggregating to ₹4,28,400/- (CGST being ₹1,84,800/- and SGST being ₹2,43,600/-).

2. The petitioner had filed a refund application in the relevant form (RFD-01), claiming refund of unutilised Input Tax Credit along with other necessary documents as prescribed under the Central Goods and Services Tax Act, 2017 (hereafter ‘CGST Act’) and the rules made thereunder.

3. The said application was made on 07.04.2021 and the refund pertained to the period of October, 2020 to December, 2020. The online lodging of the form was acknowledged under a receipt bearing No. AA0704210185797. However, the petitioner’s request for refund was not acceded to.

4. The concerned authority issued a notice dated 22.05.2021 indicating that the application was defective for the following reason:

“1. In Annexure- B (Statement of invoices to be submitted with application for refund of unutilized ITC) submitted incomplete/inappropriate information in column no. 7 – Category of input supplies – Type Input/Input services/Capital Goods as “Goods”.”

5. The petitioner responded to the said notice in FORM-GST-RFD-09 on 07.06.2021. The petitioner accepted the error in filling up the details in column no. 7 and filed a revised Annexure rectifying the information as in Column No. 7.

6. The petitioner claims that the aforesaid reply was uploaded on the portal and is duly reflected but the annexure thereto is not reflected in the portal.

7. Thereafter, the petitioner received an order dated 17.06.2021, rejecting the petitioner’s application for refund for the reason as stated in the notice dated 22.05.2021. Apparently, the concerned authority had not taken note of the petitioner’s annexure rectifying the necessary form, which was annexed with the reply dated 07.06.2021.

8. The petitioner appealed the said order dated 22.05.2021 to the Joint Commissioner Central Goods and Services Tax Appeal (Appellate Authority). The petitioner also filed written submissions enclosing therewith a copy of Annexure B to the reply submitted earlier, which, according to the petitioner, reflected the correct information.

9. Notwithstanding the same, the petitioner’s appeal was rejected by an order dated 09.02.2022, inter alia, on the ground that Annexure B was not complete in all respect, as was necessary for processing the refund and the petitioner had failed to upload the same at the time of filing of the application.

10. It is apparent from the above that the rectified information as submitted by the petitioner was not taken into account by either of the concerned authorities while considering the petitioner’s grievance regarding non-payment of its refund, as claimed.

11. We are of the view that it was essential for the concerned authorities to examine the information as submitted by the petitioner and process its claim for refund in accordance with law. Clearly, the petitioner cannot be penalised for the inadvertent error in submitting an erroneous information against Column No. 7 of its form, which has since been rectified.

12. In view of the above, we set aside the impugned orders dated 17.06.2021 and 09.02.2022 and remand the matter to the Adjudicating Authority to consider the petitioner’s response dated 07.06.2021 to the Show Cause Notice dated 22.05.2021 and to decide the matter afresh.

13. The petitioner is also at liberty to submit a fresh copy of the revised annexure to the Adjudicating Authority.

14. The petitioner’s application for refund shall be processed within a period of four weeks. If the Adjudicating Authority contemplates rejecting the petitioner’s application for refund for any reason, it shall afford the petitioner, an opportunity to be heard

15. The petition is allowed in the aforesaid terms.

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