Case Law Details
State of Jharkhand & Ors. Vs Steel Authority of India Limited (Supreme Court of India)
The dispute arose from a claim for refund of unutilized Input Tax Credit (ITC) under the Goods and Services Tax regime and culminated in proceedings before the Jharkhand High Court, followed by a challenge before the Supreme Court of India.
The writ petition before the Jharkhand High Court sought quashing of an alleged refund rejection order dated 18.10.2019 and directions for refund of ₹2,90,86,294 for the period July 2017 to March 2018, along with statutory interest. The petitioner, a government company operating the Bokaro Steel Plant, is engaged in manufacturing iron and steel and is registered under the GST Act, 2017. In the course of manufacture, it procures coal attracting compensation cess under the Goods and Services Tax (Compensation to States) Act, 2017. Under the statutory scheme, unutilized compensation cess cannot be adjusted against CGST, SGST, or IGST, but is refundable in cases of export without payment of tax.
Read HC Judgment in this case: GST Refund Cannot Be Denied Without Valid Rejection Order: Jharkhand HC
Accordingly, the petitioner filed a refund application on 04.03.2019 in Form GST RFD-01A for ₹2,90,86,294 on account of ITC on export of goods and services without payment of tax. Clarifications sought by the jurisdictional Deputy Commissioner of State Tax were furnished. In October 2019, the petitioner received an email stating that order details in Form RFD-06 had been submitted. The GST portal showed the status as “refund sanctioned,” with payment advice in Form RFD-05 pending.
Despite repeated follow-ups, no payment advice was issued. After about two and a half years, in April 2022, the petitioner was informed for the first time that the refund application had been rejected through Form RFD-01B and that the amount had been re-credited to the electronic credit ledger pursuant to an order described as Order No. 91 dated 18.10.2019. However, no copy of the alleged rejection order was supplied. Subsequent representations were rejected on the ground that the refund stood rejected and ITC had been re-credited.
In the counter affidavit before the High Court, the State authorities admitted that Order No. 91 dated 18.10.2019 was not available in official records. They nevertheless argued that the petitioner had an alternative appellate remedy under Section 107 of the GST Act and that the refund claim was not maintainable since ITC had been re-credited. They also admitted that the GST portal earlier reflected the refund as sanctioned, terming it an intermediary status.
The High Court noted the contradictory stand of the authorities and the absence of any order on record either sanctioning or rejecting the refund application. By an interim order dated 30.01.2023, the Court directed the authorities to take a decision on the refund application, observing that no legally sustainable decision existed. The petitioner debited the credited amount from its electronic credit ledger in compliance. However, instead of deciding the claim, the authorities suggested that the petitioner should file a fresh refund application.
On final adjudication, the High Court held that the alleged rejection order dated 18.10.2019 was non-existent in the eyes of law. It further held that even if such an order were assumed to exist, it would be invalid for non-compliance with Rule 92(3) of the CGST Rules, which mandates issuance of notice and grant of opportunity of hearing before rejection of a refund claim. The Court also noted that directing a fresh refund application would deprive the petitioner of statutory interest under Section 56 of the CGST Act. Observing that refunds for subsequent periods had been sanctioned and that re-credit made no practical difference as the amount was not utilized, the Court held that the refund application dated 04.03.2019 remained undecided in law. The authorities were directed to process the refund on the basis of the original application and grant interest at 6% per annum after expiry of 60 days from the date of application until payment.
The State challenged this decision before the Supreme Court by way of a Special Leave Petition. The Supreme Court found a gross delay of 676 days in filing the petition, which was not satisfactorily explained. It further held that there was no good reason to interfere with the High Court’s order. Consequently, the Special Leave Petition was dismissed on the grounds of delay as well as merits. However, the Supreme Court clarified that the question of law relating to interest was kept open. Pending applications, if any, were disposed of, leaving the High Court’s directions undisturbed.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. There is a gross delay of 676 days in preferring the present Petition which has not been satisfactorily explained by the petitioner(s).
2. Even otherwise, we find no good reason to interfere with the impugned order passed by the High Court.
3. The Special Leave Petition is, therefore, dismissed on the ground of delay as well as merits.
4. However, the question of law, as regards the interest, is kept open.
5. Pending application(s), if any, stand disposed of.
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