Validity of GST Refund Applications Pre-Policy for Unregistered Persons

C.P. Ravindranath Menon & Another Vs Deputy Commissioner of State Tax & Ors. (Bombay High Court)

GST refund application is valid even for the period prior to issuance of refund policy for unregistered persons

In a recent case, the Bombay High Court addressed the issue of whether unregistered persons can claim a refund of Goods and Services Tax (GST) for transactions that occurred before the introduction of a specific refund policy for such individuals. The court’s decision in C.P. Rabindranath Menon v. Deputy Commissioner of State Tax [Writ Petition No. 5131 of 2022 dated April 21, 2023] has significant implications for unregistered persons seeking GST refunds.

High Court set aside the order rejecting the refund claim filed by the unregistered person pursuant to agreement for purchase of residential flats and held that the Petitioner should be given opportunity for reconsidering their claim for refund and restored the refund application before the Deputy Commissioner of State Tax for decision.

Facts:

C.P. Rabindranath Menon (“the Petitioner”) is an unregistered person who entered into an agreement for purchase of a residential flat. As per the Petitioner he was entitled for refund of taxes paid under the Central Goods and Services Tax Act, 2017 (“the CGST Act”).

Accordingly, the Petitioner applied for refund to Revenue Department under Section 54 of the CGST Act.

The Revenue Department rejected the prayer of the Petitioners by stating that the Petitioner is not entitled for refund of the GST in respect of such transactions.

The Petitioner filed the writ before the Hon’ble Bombay High Court and contended that the Revenue Department rejected the refund application by without complying the principle of natural justice.

The Revenue Department contended that, the CBIC has substantially changed the procedure governing refund filed by the unregistered person vide policy document issued dated December 27, 2022.

Issue:

Whether the unregistered person can claim refund of GST on cancellation of purchase of flat for the period when there was no policy related to refund for unregistered person?

Held:

The Bombay High Court in Writ petition No.5131 of 2022 held as under:

• Noted that, the Petitioner is a flat purchaser and unregistered person.
• Further noted that, policy governing the application of refund by unregistered person came after the Petitioner filed the refund application.
• Opined that, an opportunity needs to be given to the Petitioner for reconsideration of their claim for refund and entitlement of refund will be decided on merits by the Deputy Commissioner of state tax, after giving adequate opportunity of hearing to the Petitioner.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

Heard the learned Counsel for the parties.

2. In light of the stand taken by learned Counsel for Respondent No.1, it is not necessary to set out the facts of the case in detail.

3. The brief facts of the case are that the Petitioners had entered into an agreement for sale of a residential flat with Respondent No. 6. According to the Petitioners, pursuant to further proceedings that took place under the said agreement, the Petitioners became entitled to claim refund of the Goods and Services Tax (GST). Accordingly, the Petitioners applied for refund to Respondent No.1 under the provisions of section 54 of the Goods and Services Tax (GST) Act, 2017. By the impugned order, Respondent No.1 rejected the prayer of the Petitioners stating that persons such as the Petitioners are not entitled for refund of the GST in respect of such transactions.

4. The Petitioners have filed this Petition without availing the remedy of appeal as, according to the Petitioners, the order is passed in a breach of principles of natural justice. The grounds on which the breach of principles of natural justice are alleged are stated in the memo of Petition. The learned Special Counsel for Respondent No.1 has drawn our attention to the policy document issued by the Central Board of Indirect Taxes and Customs on 27 December 2022 annexed to the reply. The learned Special Counsel for Respondent No.1 points out that there have been substantial changes in the procedure governing the application for refund by unregistered persons such as the Petitioners. The learned Special Counsel for Respondent No.1 states that this position was not in existence when the impugned order was passed.

5. Therefore, if the Petitioners succeed in demonstrating that there has been breach of principles of natural justice, the consequence will be to remand the proceedings to the authority for reconsideration. Considering the fact that the Petitioners are flat purchasers and unregistered persons and that the policy now has been evolved governing the application for refund by unregistered person subsequent to passing of the impugned order rejecting the refund, we are of the opinion that an opportunity needs to be given to the Petitioners for reconsideration of their claim for refund.

6. Needless to state that how the policy would apply to the Petitioners on facts and whether the Petitioners are entitled to refund or otherwise, will have to be decided by Respondent No.1 on its own merits after giving adequate opportunity to the Petitioners as envisaged under the statutory provision.

7. Accordingly, the impugned order dated 8 September 2022 is quashed and set aside. The application of the Petitioners dated 4 September 2020 is restored to the file of Respondent No.1- Deputy Commissioner of State Tax. Subject to earlier time bound commitment, the application be decided within twelve weeks from the date order is uploaded.

8. Writ Petition is accordingly disposed of.

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