Applications For Refund Of ITC Cannot Be Denied On Mere Suspicion: Delhi High Court

The division bench of Justice Vibhu Bakhru and Justice Amit Mahajan directed the department to initiate a refund of ITC of Rs. 72,03,961/-based on the goods that the petitioner has exported.

In this case, the petitioner filed a refund application seeking a refund of unabsorbed ITC amounting to Rs. 72.03 lakhs which were blocked by the Commissioner, CGST stating that corroborating documents were not uploaded on the GST portal. Then, the petitioner filed another application along with all the necessary documents. The department did not process the refund application since the supplier who had supplied goods to the petitioner had allegedly received fake invoices to claim false ITC refunds. The supplier's ITC refund was also blocked on the issuance of fake invoices, for which the supplier filed a writ petition in Calcutta High Court seeking to unblock its Electronic Credit Ledger (ECL). The Calcutta High Court allowed the petition and unblocked ECL. Hence, the petitioner claimed that the goods purchased from the alleged supplier were genuine and against genuine invoices. However, the Commissioner, CGST, rejected the refund application by stating that these invoices were part of a supply chain involving fake ITC.

The petitioner appealed the said order to the Appellate Authority, which held that though the petitioner was in possession of invoices issued by the supplier, it could still not be affirmed whether goods had been received or not. The Appellate authority concluded that this case was of goodless supply of forged invoices.

The Delhi High Court held that it is apparent from the information given that the petitioner's refund applications were denied solely on the basis of the petitioner's supplier issuing fraudulent invoices. There is no definitive determination based on compelling evidence that the invoices issued by the supplier to the petitioner are forgeries. The invoices issued by the petitioner's supplier are reflected in the AIO system, and there is no dispute on whether the supplier has issued an invoice or not. There is no accusation that the petitioner failed to pay the invoices (which contain IGST and Cess). Furthermore, no claims were made that the commodities in question were not exported internationally. Hence, the petitioner has proven not only that the items were exported but also that they were paid for, including the IGST and Cess.

The court observed that the accusation of availing fake credit by the supplier could not be a ground for rejecting the petitioner's refund application of ITC unless it is proved that the petitioner has not received the delivery of goods or had not paid for them.

The court directed the department to initiate the refund of ITC on goods exported by the petitioner. In an event where goods are not delivered by the supplier to the petitioner, the authorities can initiate such action as required by law.

Case Title: M/s Balaji EXIM vs Commissioner, CGST and Ors.

Citation: 2023 LiveLaw (Del) 227

Date: 10.03.2023.

Counsel for petitioner: Abhas Mishra, Aakriti P. Mishra and Shyam Bhageria.

Counsel for respondent: Aditya Singla, A. Sahitya Veena, Nidhi Banga, Nishant Kumar.

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