Refund Claim Has To Be Examined Based On Documents Pertaining To Availing Of ITC And Export Of Products On Zero Rated Basis: Madras High Court

The Madras High Court, while remanding the matter, held that the refund claim has to be examined and determined based on documents pertaining to the availing of ITC as well as the export of products on a zero-rated basis.

The bench of Justice Senthilkumar Ramamoorthy has observed that the petitioner/assessee has made the refund claims on time and cannot be faulted for the delayed processing of claims by the department.

The petitioner/assessee is a manufacturer and exporter of steel casting and industrial valves. It was a registered dealer under the TNVAT Act and the Central Sales Tax Act, 1956. In relation to its exports, the petitioner asserts that Forms W were filed on time and ITC was claimed on capital goods from the year 2011 onwards.

The petitioner pointed out that its exports are zero-rated and, therefore, it is entitled to a refund of unutilized ITC. The petitioner asserted that the office of the Accountant General had raised objections with regard to the refund of unutilized ITC on capital goods.

The Commissioner of Commercial Taxes had issued Circular No.22/2011 dated October 20, 2011, directing assessing authorities not to process and refund claims in respect of unutilized ITC on capital goods. In those circumstances, it is stated that the refund was not made. Thereafter, Circular No.12 of 2018 dated June 21, 2018 (Circular No.12) was issued by the Commissioner of Commercial Taxes, clarifying that an assessee is entitled to a refund of unutilized ITC on capital goods under applicable provisions of the TNVAT Act. Thereafter, the petitioner made a request for a refund on August 4, 2020, and the request was rejected by the department.

The petitioner contended that the refund claim was not settled in view of Circular No. 22. After the Commissioner of Commercial Taxes clarified that refunds could be made under Circular No. 12, the assessing officer was in a position to process refund claims. Therefore, the rejection of the refund claims calls for interference. The rejection on the ground that the period of limitation under Section 27 of the TNVAT Act had expired is unsustainable.

The department contended that a refund claim is required to be made within 180 days from the date of the zero-rated sale by the exporter. In this connection, he refers to sub-section (3) of Section 18 of the TNVAT Act. Since the petitioner did not make the refund claim within the specified period, the Additional Government Pleader submits that the petitioner is not entitled to a refund. In addition, by drawing reference to Section 27 of the TNVAT Act, he submits that the six-year period prescribed therein is the outer limit for revising the assessment. There is no interference warranted with the impugned order.

“The petitioner has made the refund claims on time and cannot be faulted for the delayed processing of such claims by the respondent. If such claims were not processed on account of Circular No. 22, which was superseded by Circular No. 12, at a minimum, the limitation period should be reckoned from the date of such Circular. For such reason, the impugned order is unsustainable,” the court said.

The court quashed the order and remanded the matter for reconsideration of the refund claim of the petitioner on its merits. It was made clear that the assessing officer would not go into the issue of limitation. The refund claim shall be considered and disposed of within a maximum period of two months after providing a reasonable opportunity to the petitioner.

Counsel For Petitioner: B.Raveendran

Counsel For Respondent: T.N.C.Kaushik

Case Title: Flow Link Systems Pvt. Ltd. Versus The Assistant Commissioner (ST)(FAC)

Citation: 2024 LiveLaw (Mad) 55

Case No.: Writ Petition No.27842 of 2022

Click Here To Read The Order