Refunds under GST: Analysis of relevant provisions & important judgments

Refunds under GST: Analysis of relevant provisions & important judgments

Introduction

 GST is a tax levied on the supply of goods and services or both. It is divided into CGST(Central Goods and Services Tax), SGST(State Goods and Services Tax)/UTGST(Union Territory Goods and Services Tax) and IGST(Integrated Goods and Services Tax). Each of these levies, have their source in statutes viz. the CGST Act, 2017, SGST/UTGST Act, 2017 and the IGST Act, 2017 respectively. Article 265 of the Constitution of India which provides that no tax shall be levied except without authority of law therefore stands fully complied with. Accordingly, there is a duty on the taxpayer to pay GST.

Ordinarily, where for any reason, GST is paid in excess to the Department, a refund of the excess becomes due to the taxpayer. Upon filing an application on the common portal with the requisite details, the taxpayer ought to be granted a refund of the excess tax paid by him within a reasonable period of time. However, though the concept of refunds under GST law seems at first blush fairly straightforward, it is by and large one of the most litigious issues under GST law with a considerable amount of litigation pending across the High Courts and Supreme Court.

Modus operandi for claiming illegitimate refunds

The burden of discharging indirect tax may be onerous to many who have to relinquish the money collected as tax while filing returns. However, in some cases, the persons go to the extent of deciding to cheat the Department by setting up shell companies or entering into the domain of organized crime to collect refunds of illusory tax paid. In order to extract monies, the modus operandi followed by some taxpayers is to cause to be issued in their name fake invoices upon which they claim to have paid tax when in reality there is no input tax whatsoever paid by them. Also, fake invoices towards exports are generated without there being any underlying export of goods or services and without payment of IGST or without payment of input tax, and refunds are claimed of non-existent IGST or input tax paid basis the fake invoices. In such circumstances, the Department through its officers issues notices under Section 73/74 of the CGST Act, 2017 or conducts audits of such taxpayers and seeks to realise the monies claimed by such persons pursuant to credit of refund to the bank account. Mostly, Writ Petitions are filed challenging the process of the Department basis the SCN issued or otherwise.

Relevant Provisions under the CGST Act, 2017, IGST Act, 2017 & CGST Rules, 2017

In this article, for the sake of brevity, we will be dealing only with important general provisions pursuant to amendment by the Finance Act, 2023, and not the notifications and circulars issued by the CBIC which may be referred to separately.

 The general provisions under the CGST Act, 2017 and the IGST Act, 2017 pertaining to refunds has been analysed and the corresponding Rules under the CGST Rules, 2017 have also been placed alongside the relevant provisions. 

• While the charging section(Section 9) makes the levy of GST possible, Chapter XI of the CGST Act, 2017 makes provisions for refund of GST.
• Section 54(1) states that any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed.

The above sub-section provides a limitation for taxpayers to claim refunds, viz. 2 years from the ‘relevant date’. Relevant date has been defined in the Explanation to Section 54(14) and includes various situations when the starting point of limitation commences for filing the refund application.

The Proviso to Section 54 states that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of Section 49(6), may claim such refund in such form and manner as may be prescribed.

Section 49(6) states that the balance in the electronic cash ledger or electronic credit ledger after payment of tax, interest, penalty, fee or any other amount payable under the Act or Rules may be refunded in accordance with Section 54.

Rule 89(1) is the relevant Rule to this sub-section, which states that any person(except the persons covered under notification issued under Section 55) claiming refund of any balance in the electronic cash ledger in accordance with the provisions of Section 49(6) or any tax, interest, penalty, fees or any other amount paid by him, other than refund of IGST paid on goods exported out of India may file the application in FORM GST RFD-01 through the common portal or through a Facilitation Centre notified by the Commissioner.

Rule 89 of the CGST Rules, 2017 provides for making the application for refund in the said Form even in cases where the refund is claimed under Section 49(6) on the balance in the electronic cash ledger on account of excess cash balance available in the ledger after payment of tax.

• Section 77 and Rule 89(1A) state that if any person claims refund of tax paid by him on an intra-state supply which is subsequently held to be an inter-state supply, may within 2 years from the date of payment of tax on the inter state supply file an application in FORM GST RFD-01 through the common portal.

Proviso 1 makes provision of filing an application before sub-rule 1(A) comes into force.

• Section 19 of the IGST Act, 2017 states that taxes paid pursuant to the supply being treated as an inter state supply shall be refunded when it is subsequently held that the supply is an intra state supply.

When tax on inter-state supplies have been paid on account of it being subsequently held that the supply, earlier treated as an intra state supply, is an inter-state supply, the taxes paid pursuant to the supply being treated as an intra state supply shall be refunded. 

Likewise the tax paid pursuant to treating the supply as an inter state supply when it is actually an intra state supply shall be refunded under Section 19.

• Section 54(3) is also important and states that subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period:

Proviso 1 states that no refund of unutilised input tax credit shall be allowed in cases other than–– (i) zero rated supplies made without payment of tax; (ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council:

Proviso 2 states that no refund of unutilised input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty.

Proviso 3 states that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.

Section 16 of the IGST Act, 2017 deals with Zero rated supplies. An export of goods and services or both and a supply of goods and services or both to an SEZ developer or an SEZ unit is considered a zero rated supply. Sub-section 3 is important which states that the refund of unutilized ITC is to be granted to the registered person when the supply is zero rated upon furnishing a Bond and Letter of Undertaking in accordance with the CGST Act and Rules. Sub-section 4 states that the government may notify a class of persons who shall pay IGST on zero rated supplies and claim refund of the amount of IGST so paid

However, in case the sale proceeds have not been realized, the exporter is liable to deposit the refund so received along with the applicable interest within 30 days from the expiry of the time limit under the FEMA, 1999 for receipt of foreign exchange remittances.

This sub-section provides for refund of unutilised ITC. It is clear from the above provisions that refund of unutilized ITC can be allowed only in the above situations and no other. For example, if there is no output tax liability, ITC accumulated cannot be refunded as unutilized ITC in the absence of any statutory provision allowing for the same.

• Section 54(4) states that the application shall be accompanied by— (a) such documentary evidence as may be prescribed to establish that a refund is due to the applicant; and (b) such documentary or other evidence (including the documents referred to in section 33) as the applicant may furnish to establish that the amount of tax and interest, if any, paid on such tax or any other amount paid in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such tax and interest had not been passed on to any other person.

Proviso 1 states that where the amount claimed as refund is less than two lakh rupees, it shall not be necessary for the applicant to furnish any documentary and other evidences but he may file a declaration, based on the documentary or other evidences available with him, certifying that the incidence of such tax and interest had not been passed on to any other person. 

Rule 89(2) is relevant and states that the application for refund under Rule 89(1) shall be accompanied by documentary evidence in Annexure 1 in FORM GST RFD-01 to establish that a refund is due to the applicant.

Rule 89(2) provides a list of documents to accompany the refund application to establish the claim of refund and is exhaustive.\

• Section 54(5) states that if, on receipt of any such application, the proper officer is satisfied that the whole or part of the amount claimed as refund is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund referred to in section 57.

Before adverting to Section 54(6), Section 54(7) is relevant which states that the proper officer shall issue the order under sub-section (5) within sixty days from the date of receipt of application complete in all respects.

Rule 92(5) is relevant which provides for credit of the refund claimed, to the Fund in cases where the proper officer is satisfied that the amount refundable is not payable to the applicant under Section 54(8).

The final order sanctioning refund is issued under FORM GST RFD-06. 

Refunds are to be credited to the Fund in cases where the refund is not payable to the applicant under the circumstances mentioned in Section 54(8).

• Section 54(6) states that notwithstanding anything contained in sub-section (5), the proper officer may, in the case of any claim for refund on account of zero-rated supply of goods or services or both made by registered persons, other than such category of registered persons as may be notified by the Government on the recommendations of the Council, refund on a provisional basis, ninety per cent. of the total amount so claimed, excluding the amount of input tax credit provisionally accepted, in such manner and subject to such conditions, limitations and safeguards as may be prescribed and thereafter make an order under sub-section (5) for final settlement of the refund claim after due verification of documents furnished by the applicant.

Rule 91 deals with grant of provisional refund. Rule 91(1) states that person will be granted the refund on provisional basis if he is not during the past 5 years been prosecuted for any offence where the amount exceeds 250 lakh rupees. The provisional refund is granted in FORM GST RFD-04 and is to be granted within 7 days from date of acknowledgment issued under Rule 90(1) or 90(2).

The next step is the issue by the proper officer under FORM GST RFD-05 of a payment order and the funds will be credited to the bank account of the applicant mentioned in his registration particulars and as specified in the refund application.

 The provisional refund is credited to the bank account of the taxpayer after the above steps have been followed.

Section 54(6) provides for refund of tax on a provisional basis to the extent of 90% of the claim when the refund is claimed on zero rated supplies of goods or services or both by registered persons and subject to the exception made under the section.

• Section 54(8) states that notwithstanding anything contained in sub-section (5), the refundable amount shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to— (a) refund of tax paid on export of goods or services or both or on inputs or input services used in making such exports; (b) refund of unutilised input tax credit under sub-section (3); (c) refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued, or where a refund voucher has been issued; (d) refund of tax in pursuance of section 77; (e) the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person; or (f) the tax or interest borne by such other class of applicants as the Government may, on the recommendations of the Council, by notification, specify.

The final order sanctioning refund is issued under FORM GST RFD-06. 

This provision entitles the claimant to grant of refund to his own bank account in the situations enumerated above and the amounts will not be credited to the Fund.

• Section 54(8A) states that the Government may disburse the refund of the State tax in such manner as may be prescribed.

• Section 54(9) states that notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provisions of this Act or the rules made thereunder or in any other law for the time being in force, no refund shall be made except in accordance with the provisions of sub-section (8).

• Section 54(10) states that where any refund is due under sub-section (3) 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 zero-rated supplies by 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.

The Explanation states that for the purposes of sub-section 10, the expression ―specified date shall mean the last date for filing an appeal under the CGST Act. 

Rule 91(2) states that the proper officer may withhold the refund under FORM GST RFD-07 after recording reasons for doing so.

This sub-section provides for withholding of refund and deduction of monies from the refund due and payable in certain situations enumerated above. The situations are exhaustive and the refund can be withheld or deducted only in those situations.

• Section 54(11) states that 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.

• Section 54(12) states that where a refund is withheld under sub-section (11), the taxable person shall, notwithstanding anything contained in section 56, be entitled to interest at such rate not exceeding six per cent. as may be notified on the recommendations of the Council, if as a result of the appeal or further proceedings he becomes entitled to refund.

• Section 54(13) states that notwithstanding anything to the contrary contained in the section, the amount of advance tax deposited by a casual taxable person or a non-resident taxable person under sub-section (2) of section 27, shall not be refunded unless such person has, in respect of the entire period for which the certificate of registration granted to him had remained in force, furnished all the returns required under section 39.

• Section 54(14) states that notwithstanding anything contained in the section, no refund under sub-section (5) or sub-section (6) shall be paid to an applicant, if the amount is less than one thousand rupees.

The Explanation defines ‘refund’ and ‘relevant date’.

• Section 56 deals with interest on delayed refunds. It states that if any tax ordered to be refunded under sub-section (5) of section 54 to any applicant is not refunded within sixty days from the date of receipt of application under sub- section (1) of that section, interest at such rate not exceeding six per cent. as may be specified in the notification issued by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application under the said sub-section till the date of refund of such tax.

Proviso 1 states that where any claim of refund arises from an order passed by an adjudicating authority or Appellate Authority or Appellate Tribunal or court which has attained finality and the same is not refunded within sixty days from the date of receipt of application filed consequent to such order, interest at such rate not exceeding nine per cent. as may be notified by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application till the date of refund.

The Explanation states that for the purposes of this section, where any order of refund is made by an Appellate Authority, Appellate Tribunal or any court against an order of the proper officer under sub-section (5) of section 54, the order passed by the Appellate Authority, Appellate Tribunal or by the court shall be deemed to be an order passed under the said sub-section (5).

Rule 94 is relevant and the order by the proper officer of granting interest on refunds is to be made in FORM GST RFD-05. The interest shall be credited to the bank account of the petitioner. 

General Rules under the CGST Rules, 2017

Equally important are some other general Rules under the CGST Rules, 2017. They are listed below:

• Rule 89(3) states that where the application relates to refund of Input Tax Credit, a corresponding debit will be made in the Electronic Credit Ledger equal to the refund claimed.
• Rule 89(4) provides for refund in cases of zero rated supplies without payment of tax under bond or letter of undertaking in accordance with Section 16(3) of the IGST Act. A formula to compute the ITC has been laid down.
• Rule 89(4A) provides for refund of ITC based on Notification 48/2017-CT dated 18^th October, 2017(Section 3(i)).
• Rule 89(4B) provides for refund of unutilized ITC on account of zero-rated supplies without payment of tax where the supplier has received the supplies on which the supplier has availed the benefit of certain Notifications. The ITC on such goods/services shall be granted.
• Rule 89(5) provides for refund of ITC in the case of inverted duty structure in accordance with a formula.
• Rule 90(1) provides for Acknowledgment in FORM GST RFD-2 where there is refund claimed from the electronic cash ledger. The date of filing claim for refund shall be provided. The time period under Section 54(7) will be counted from date of such filing.
• Rule 90(2) provides for refund other than refund from the electronic cash ledger. An Acknowledgment in FORM GST-RFD02 shall be made available to the applicant on the common portal.
• Rule 90(3) and the proviso and Rule 90(4) provide for rectification of deficiencies in filing the refund application.
• Rule 90(4) deals with withdrawal of refund application in FORM GST RFD-01. Rule 90(5) provides for credit back to the electronic cash ledger or credit ledger in the event of filing FORM GST RFD-01W.
• If the proper officer is satisfied and records reasons for inadmissibility of the refund/refund is not payable, he shall issue a notice in FORM GST RFD-08 requiring him to furnish a response in FORM GST RFD-09 within a period of 15 days from the date of receipt of such notice and after considering the reply may pass an order in FORM GST RFD-06 ordering the refund.
• Rule 96C defines ‘bank account’ of the applicant as that which is in the name of applicant and obtained on his PAN.

Relevant Rules on export of goods or services or both

When IGST has been paid

 Rule 96(1) states that the shipping bill filed by an exporter of goods shall be deemed to be the application for refund of IGST paid on the goods exported out of India and such application shall be deemed to be filed when the person in charge of the conveyance files a departure manifest or export manifest or export report covering the number and date of the shipping bills or bills of export or when the applicant has furnished a return in FORM GSTR-3B(monthly/quarterly return) or when the applicant has undergone AADHAR authentication in the manner provided under Rule 10B. If there is a mismatch between the details provided in the shipping bill and the statement in FORM GSTR-1 for outward supplies, the application is deemed to have been filed when the mismatch is rectified by the exporter.

Rule 96(2) and Rule 96(3) state that once the details of the export invoices are transmitted to the GSTN common portal from the portal of Customs, the refund shall be processed and the amount credited to the bank account of the applicant. Rule 96(4) provides for when the refund is to be withheld in the situations enumerated therein.

When IGST has not been paid

 Rule 96A(1) makes provisions for refund of taxes paid on inputs when IGST has not been paid. The application containing a Bond or Letter of Undertaking has to be furnished in FORM GST RFD-11 prior to export. The Bond or Undertaking obligates the registered person to make payment of tax in cases where the export of goods is not made outside India within a period of fifteen days after the expiry of three months from the date of issue of the invoice for export/fifteen days after the expiry of one year if the payment is not received by the exporter in convertible foreign exchange or in Indian rupees wherever permitted by the RBI.

Rule 96A(3) states that if the goods are not exported and the registered person fails to pay the amount as above, the export allowed shall be withdrawn forthwith and the said amount shall be recovered from the registered person in accordance with Section 79(Recovery of tax).

Rules 96A(4) states that if the registered person pays the amount due the export shall be restored immediately. Rule 96A(5) states the Board may by notification specify when a Letter of Undertaking must be furnished instead of a Bond. Rule 96A(6) specifies that zero rated supplies to an SEZ will also be governed by sub-rule 1.

Sabka Vishwas(Legacy Dispute Resolution) Scheme, 2019

 The scheme was introduced vide the Finance Act, 2019 to settle pending litigation and to overcome the burden of cases under indirect tax law pending before various authorities. Under Section 123 of the said Act, the relief to the declarant is computed and the declarant is obligated to pay the balance amount. Under Section 125 the designated committee shall verify the declaration and finally under Section 125 the declarant is issued a statement containing the amount payable as per the designated committee. In case the amount is less, the designated committee may require the declarant to pay the balance amount. A question arises whether the declarant is entitled to a refund in a case where the amount paid by the declarant is in excess of the amount declared, or pursuant to the amount informed by the designated committee after estimation of the amount?

Section 129 states that the declarant shall not be entitled to any refund of the taxes paid under the Scheme. Moreover, there is no provision for refund in cases where the amount paid by the declarant is in excess as stipulated above. Hence, a question arises whether a Writ Petition may be filed invoking Article 226 of the Constitution of India praying for a mandamus from the High Court to direct the Department to refund the excess? Is the writ petition maintainable? One thing is to be borne in mind, i.e the excess is almost always paid by the declarant on his own accord on account of his own wrongdoing. Further, if there is an alternative remedy available i.e filing of a suit, would the writ be maintainable since there is a jurisdictional defect in the manner of procedure by the Department? A writ of mandamus can only be issued if there is patent illegality or error in process and not routinely and ordinarily when there is no defect or error by the Department. Hence, each case would have to be decided on its own facts and circumstances.

Relevant Judicial Precedents on Refund under GST Law

Litigation pertaining to refunds under GST law is abstract and myriad and arises in different situations. A few cases are noted below:

1. In UOI vs. VKC Footsteps India Pvt Ltd. [1], the Hon’ble Supreme Court was faced with the issue of whether unutilized ITC would include input services as well and not just inputs as goods for the purposes of claiming refund on account of the inverted duty structure. The inverted duty structure is a case where the tax rate on inputs is higher than the tax rate on outputs thereby resulting in an excess balance in the electronic credit ledger. Rule 89(5) provides for refund on account of inverted duty structure.

An elaborate thesis was prepared by the learned Judge analysing comprehensively the migration to the new GST regime, the definitions of various terms under the Act, and an analysis of refunds in particular. The Court came to the conclusion that the term ‘input’ having been defined under Section 2(59) of the CGST Act as goods other than capital goods, it would not be appropriate for the Supreme Court to interfere and enter into the domain of the legislature by prescribing what constitutes inputs for the purposes of quantifying the unutilized ITC. Therefore, inputs would mean input goods only and not input services for the purposes of claim of ITC. When the statutory language is clear and precise, the Courts ought not to interfere. The Supreme Court also noted the following:

i) Refund can be granted only in cases provided in terms of sub-clauses (i) and (ii) of Proviso 1 to Section 54(3) and no other. Hence the said provisions are in the nature of restrictions, and make no room for further entitlement to claim refund.

ii) There is a difference between claiming refund of tax paid on input services pursuant to undertaking zero rated supplies involving export and claiming refund of unutilized ITC. In the former situation, the refund may be claimed fully, however the refund of unutilized ITC cannot mean ITC of input services can be taken into account for the purposes of refund and the proviso is in the nature of a restriction on the claim of ITC on input services.

iii) The legislature in its wisdom has expressly restricted the claim of ITC to input goods only and not input services after much deliberation and analysis of various situations which ultimately leads to the drafting of the provision. Hence, the Courts cannot step in to alter or rewrite the statutory provision.

iv) There is no statutory entitlement to a refund. Hence, goods and services must be treated at par when it comes to refund of unutilized ITC cannot be accepted.

v) Rule 89(5) provides for a formula to compute refund on account of an inverted duty structure. It is applicable only to inputs used as goods. A situation may arise when ITC on input services can be utilized to offset turnover not having inverted duty structure. However, with a business having only inverted duty structure it is not possible to set off ITC on input services and such ITC will accumulate. Even if the provision is not ‘perfect’ unless it is absurd or leads to manifest injustice, no tinkering must be done. It is not permissible to rewrite the provision.

In my view, the judgment is without blemish inasmuch as there is a difference between claiming refund of unutilized ITC and claiming refund of ITC paid pursuant to export of goods or services. In the latter there is a crystallized right to obtain refund but in the former there is no direct express provision providing for refund of tax paid on input services. The ld. Judge has dealt with all possible contentions and provided a comprehensive analysis. 

2. In UOI & Ors. Vs. M/S. Bundl Technologies Private Limited[2] the issue was of refund pursuant to payment de hors the GST enactments upon detention of the directors of the Petitioner by the Department.

The registered person was a company operating the well known food delivery app ‘Swiggy’. An agreement was entered into between the company and one Green Finch for delivery partners provided by Green Finch to the company. Tax was collected by Green Finch from the company on the consideration received from the company, and the company availed ITC in terms of Section 16 of the CGST Act, 2017. Subsequently, an investigation was carried out by the DGGI and the directors were questioned for long hours i.e beyond midnight. In order to secure their release some amounts(Rs. 27 crores) were deposited in order to secure the release of the directors of the company without following the procedure under the GST enactments. Since no show cause notice was issued by the Department, the company eventually filed an application for refund of the amount deposited(Rs. 27 crore) alongwith interest @6%p.a as noted above. The refund application filed by the Petitioner did not evoke any response. The ld. Single Judge disposed of the writ petition for processing the claim of refund by allowing the claim. The Hon’ble Court in Writ Appeal noted that the deposit was not as per law(Section 74(5) of the CGST Act, 2017). Also, the Petitioner made the payment on a without prejudice basis after reserving its right to a refund. Further, not only was the refund application filed within time, the writ petition was also filed within the period of time for filing the refund application. Hence the refund was directed to be granted.

In my view, a question arises whether a refund can be granted under the CGST Act, 2017 on the basis of an application made by the registered person, when the excess tax paid is not tax paid under any of the GST enactments. If the ‘tax’ is paid within the purview of the CGST Act, 2017, i.e by debiting the electronic cash ledger or credit ledger, it is open for the Petitioner to claim refund of the excess lying in the electronic cash ledger or the amount in the electronic credit ledger. However, if the payment is completely de hors the CGST Act, 2017, i.e there is no debit from the ledgers, it does not seem plausible that the refund is claimed under the said Act. In the above case, neither has the payment made from the electronic ledgers, but the Hon’ble Court came to a conclusion that the payment is not voluntarily made in accordance with Section 74(5) of the CGST Act. Hence, in my view, it was inappropriate for the Hon’ble Court to order grant of refund.

3. In a recent judgment of the Hon’ble Jharkhand High Court in Steel Authority of India Ltd. vs. State of Jharkhand[3], the issue before the Hon’ble Court was of granting refund along with interest but the Departments contention was for the Petitioner to file a fresh refund application.

The Hon’ble Court allowed the refund application of the Petitioner along with interest @6% p. a after a period of 60 days from the date of filing of refund application to the date of payment of the refundable amount.

The brief facts are that the Petitioner was engaged in export of goods and services. It paid compensation cess for using coal as inputs for manufacturing of iron and steel. It claimed a refund of about 2.90 Crores by debiting the electronic credit ledger. The refund was initially sanctioned but later denied by the Department. However, the Department did not produce any order rejecting refund. The Court was of the view that the Departments stand that a fresh refund application should be filed would disentitle the petitioner from claiming interest for the period when it was due pursuant to filing the instant refund application. The Court also noted that refund for subsequent years has been granted by the Department and there is no reason for not granting the refund with interest. Hence, the refund was directly ordered as prayed for in the writ petition.

4. In Sunlight Cable Industries vs. Commissioner of Customs[4], the issue before the Hon’ble Bombay High Court was refund of IGST paid on export of goods in relation to availment of duty drawback. Initially, the petitioner filed an incorrect Return in FORM GSTR-1(Return of outward supplies) which was later rectified by supplying the correct invoice and Port Code. However, the refund application of the Petitioner was not processed since the contention of the Department was that the Petitioner had availed of a higher duty drawback on the Shipping Bill and Export Invoice.

The Court referred to several judgments and noted that higher duty drawback claim has the elements of Customs, Service Tax, and Central Excise, hence if higher duty drawback is claimed, there can be no refund of IGST since then there would be a double benefit inasmuch as the these taxes have been subsumed in/have become a part of GST. Hence there cannot be a refund twice over. In the instant case, the issue was of claim of double benefit and since no double benefit was claimed it, it was not open to deny refund to the Petitioner of the IGST paid by it.

Conclusion

I sincerely hope that the reader is now fully equipped with a significant understanding of Refunds under GST law. The issue of Refund is one of the most litigious issues with several cases pending across various fora across the country. The stakes involved are very high in view of the fact that the taxes paid by the registered person could be directed by the Courts to be refunded/returned and that too along with interest if the claim is genuine. Hence, the adjudication process has to be very precise, and Courts must scrutinize the petitions before it carefully, otherwise there may result a serious loss to the exchequer or to the taxpayers. There is almost always a loser in litigation, and therefore justice ought to be meted out properly.

[1] Civil Appeal No 4810 of 2021 decided on 13.9.2021(SC)

[2] W.A. 1274/2021 decided on 3.3.2022(Kar.)(HC)

[3] [2023] 151 taxmann.com 391 (Jharkhand)/[2023]

[4] WP/284/2021 decided on 27.6.2023(Bom.)(HC)