Refusal To Entertain Refund Application Of Unutilized ITC; Himachal Pradesh High Court Imposes 10K Cost On Deputy CGST Commissioner

The Himachal Pradesh High Court has imposed a cost of Rs. 10,000 on the Deputy CGST Commissioner for refusing to entertain the application of the assessee or petitioner for a refund of unutilized input tax credit.

The bench of Chief Justice M.S. Ramachandra Rao and Justice Satyen Vaidya has observed that the Deputy CGST Commissioner could not have refused to entertain the application of the petitioner for refund of unutilized input tax credit on the ground that the petitioner was not a “registered” person at the relevant point in time. The Deputy CGST Commissioner should also have taken note of Rule 41 of the Central Goods and Services Tax Rules, which deals with instances of transfer of credit on amalgamation, merger, etc. of businesses or companies.

The petitioner/assessee assails the order passed by the Deputy CGST Commissioner declining to consider the applications for refund of GST for the financial years 2017-2018, 2018-2019, and 2020-2021. The application for a refund was rejected on three grounds. Firstly, an application form, i.e., RFD-01, had not been filed. Secondly, the petitioner had registered under the Central Goods and Services Tax Act, 2017 only on October 21, 2020, and had not been registered during the relevant period. Lastly, refund applications have to be filed in electronic mode only, and manual applications will not be entertained.

The assessee contended that it had informed the respondent on May 30, 2022, that it got registered with GST in October 2020 pursuant to the acquisition of a business undertaking from M/s Sozin Flora Pharma LLP. The eligible ITC reflecting in the Electronic Credit Ledger in the books of Sozin was transferred to it by filing ITC-02. It therefore wished to file a GST refund application under the “Inverted Duty Structure” for the financial years 2017–2018, 2018–2019, and 2020–2021, but since its GST registration was effective from October 2020, it was not able to file GST refund applications through online mode and was forced to apply manually. It was sending refund applications through separate emails, and the same should be considered.

The Deputy CGST Commissioner placed reliance on a circular dated November 18, 2019 mandating refund applications to be filed only electronically w.e.f. September 26, 2019.

“We fail to see why the reasons assigned by the petitioner cannot be accepted for its inability to file refund applications in electronic mode or online mode and why its manual applications cannot be entertained having regard to Rule 97A of the Central Goods and Services Tax Rules, which specifically permits such manual filing of applications,” the court said.

The court held that a circular issued by the department cannot go contrary to a rule framed by the competent authority, such as Rule 97A, and the respondent authority ought not to have rejected the applications for refund on the ground that a particular application form, RFD-01, has not been filed or that the applications for refund were filed manually and not in electronic or online mode.

The court held that Rule 97A of the Central Goods and Services Tax Rules prevailed and would have to be taken into account by the assessing authority, and he could not insist on only the electronic filing of refund applications.

The court allowed the writ petition and set aside the order passed by the Deputy CGST Commissioner.

The court remitted the matter to the Deputy CGST Commissioner for fresh consideration within four weeks from the date of receipt of a copy of the order.

Counsel For Appellant: Bharat Raichandani

Counsel For Respondent: Vijay Arora

Case Title: M/s AMN Life Pvt. Ltd. Versus Union of India & others

Citation: 2024 LiveLaw (HP) 30

Case No.: CWP No.7919 of 2022

Click Here To Read The Order