Case Law Details
Omkara Footwear Through Its Proprietor Shyam Lal Bansal Vs Commissioner of Central Goods And Services Tax And Another (Delhi High Court)
Delhi High Court Sets Aside Order Against Omkara Footwear in GST Refund Dispute
Introduction: The Delhi High Court recently issued a significant judgment in the case of Omkara Footwear, challenging an order dated 10.12.2021, rejecting appeals against the Adjudicating Authority’s decisions on refund applications. The petitioner sought a refund of ₹18,00,202 for the period January to March 2020 under the Central Goods and Services Tax Act, 2017, and the State Goods and Services Tax Act, 2017. The court found procedural irregularities and remanded the matter for fresh consideration.
Background: The petitioner, Omkara Footwear, filed three separate refund applications totaling ₹18,00,202. The Adjudicating Authority, citing concerns over input tax credit related to “non-existent/high-risk” entities, issued show cause notices. Omkara Footwear responded with the required documents, but the refund applications were rejected on the grounds that one supplier, M/s. Yamuna Overseas, was found non-existent during physical verification, and the petitioner allegedly failed to make payments within 180 days.
Court’s Observations:
1. Procedural Impropriety: The court noted that the Adjudicating Authority’s rejection orders were based on grounds not specified in the show cause notices. Additionally, the notices did not mention the specific dealer (M/s. Yamuna Overseas) alleged to be non-existent. This was deemed a procedural irregularity.
2. Lack of Reconciliation Statement: The court highlighted the absence of a reconciliation statement in the records to establish whether Omkara Footwear had made payments within the stipulated 180 days. The absence of this crucial document raised questions about the basis of the rejection.
3. Active GST Registration: The petitioner presented evidence, including a screenshot from the GST Portal, indicating that M/s. Yamuna Overseas still had an active GST registration. The court found this material important in assessing the claim of the supplier’s non-existence.
Court’s Decision: The Delhi High Court set aside the impugned order and the Adjudicating Authority’s decisions dated 28.09.2020. The matter was remanded to the Adjudicating Authority for fresh consideration. The court directed the petitioner to respond to the specific allegations, provide relevant material, and submit a reconciliation statement within four weeks. The Adjudicating Authority was instructed to reconsider the refund applications after affording the petitioner an opportunity to be heard.
Conclusion: The judgment in the Omkara Footwear case underscores the importance of adherence to procedural fairness and the need for specificity in show cause notices. The court’s decision to remand the matter for fresh consideration provides an opportunity for the petitioner to present evidence and address the allegations. This case serves as a reminder of the significance of due process in tax matters and the courts’ role in upholding procedural propriety.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The petitioner has filed the present petition, inter alia, impugning a common order dated 10.12.2021 (hereafter ‘the impugned order’), whereby the appeals preferred by the petitioner (Appeal No. 160- GST/Appeal-1/North/2021, Appeal No. 161- GST/Appeal-1/North/2021 & Appeal No. 162- GST/Appeal-1/North/2021), each dated 13.07.2021 were rejected. The petitioner had preferred the said appeals impugning three separate orders passed by the Adjudicating Authority all dated 28.09.2020, whereby the respective applications filed by the petitioner seeking refund for the period January, 2020 to March, 2020, were rejected.
2. The petitioner had preferred three applications seeking refund of an aggregate amount of ₹18,00,202/-(₹7,74,776/- in respect of Central Goods and Services Tax Act, 2017 and ₹10,55,426/- in respect of State Goods and Services Tax Act, 2017) for the period January, 2020 to March, 2020.
3. The petitioner received three separate Show Cause Notices proposing to reject the respective applications on identical grounds. These show cause notices stated that the Adjudicating Authority had noticed that the petitioner had availed of input tax credit in respect of one or more entities which were “non-existent / high risk”. The petitioner was called upon to submit the following documents within a period of 15 days from the date of the show cause notices:
“(a). Certified copy of all input/ invoices;
(b) Bank statement showing payment details against each invoices”.
4. Admittedly, the petitioner supplied copies of the invoices as well as the bank statements. Notwithstanding the same, the petitioner’s claim for refund was rejected, essentially, for two reasons. First, that during physical verification, one of the suppliers, that is, M/s. Yamuna Overseas from whom the petitioner had received supplied was found to be non-existent at its registered place of business; and second that the documents submitted by the petitioner failed to establish that the petitioner had paid for the goods and services within a period of 180 days from the date of the invoices.
5. The petitioner contested the aforesaid premises for rejecting its claim and filed appeals under Section 107 of the CGST Act. However, the Appellate Authority upheld the order rejecting the petitioner’s application for refund.
6. It is the petitioner’s case that the payments were made within the stipulated time and that the suppliers from whom the petitioner had availed of supplies were existent dealers. The petitioner has produced a screenshot from the website indicating that the GST registration of M/s. Yamuna Overseas is still active and extant. In addition, the petitioner had also produced the invoices, along with the e-waybills mentioning the registration number of the vehicles in which the goods received from the said supplier, were transported.
7. The counter affidavit also does not shed any light as to why the screenshot of the GST Portal still reflects M/s Yamuna Overseas as an active registered supplier. Although, it is contended that the petitioner had paid for the invoices beyond the stipulated period of one hundred and eighty days, there is no re-conciliation statement on record, which establishes the same.
8. It is material to note that the show cause notices issued to the petitioner by the Adjudicating Authority did not propose to reject the refund applications on the ground that it had made payments for the supplies beyond the period of one hundred and eighty days from the date of issuance of invoices. Thus, the orders passed by the Adjudicating Authority proceed on a ground, which was not put to the petitioner at the material time. The show cause notice also did not mention the specific registered dealer (M/s Yamuna Overseas) which is alleged to be non-existent.
9. In view of the above, we consider it apposite to set aside the impugned order as well as the orders dated 28.09.2020 rejecting the applications filed by the petitioner for refund pertaining to the period January, 2020 to March, 2020 and remand the matter to the Adjudicating Authority to consider afresh. Since the allegation that M/s Yamuna Overseas is non-existent and that the petitioner had not paid the amount due as per the invoices within the period of one hundred and eighty days is articulated in the impugned order, it would not be necessary for the Adjudicating Authority to issue a fresh show cause notice. The petitioner is at liberty to respond to the said allegations and provide all relevant material as the petitioner considers necessary. The petitioner shall also furnish a reconciliation statement showing the date of invoices and the dates on which the payments have been made. The same may be filed before the Adjudicating Authority within a period of four weeks from date. The Adjudicating Authority shall consider the refund applications afresh and decide the same after affording the petitioner an opportunity to be heard.
10. The petition is disposed of in the aforesaid terms.
