Where the Erroneous Refund Claimed Is Voluntarily Paid by the assessee, it is logical to restore the Input Tax Credit in the Electronic tax Ledger.

Facts: In this case, the petitioner is a Company registered under the Companies Act, it was engaged in the business of manufacturing various types of toys. It was also registered under the GST Act and was issued the ‘advance license' enabling duty free import of its raw material. The applicant inadvertently cleared and exported its finished goods upon payment of the Integrated Goods and Services Tax instead of exporting it under the Letter of Undertaking (LoU). Since the exports were made upon the payment of IGST, the applicant periodically received auto-refund of the IGST paid at the time of exports. On realising this mistake, the applicant voluntarily paid the requisite IGST along with interest to the department. It was further highlighted by the applicant that it realised that it could not utilise the ITC for the payment of the IGST in the export of the goods produced from raw-material imported under the advance license in view of Rule 96(1) of CGST Rules. Hence, the Applicant had paid the aforesaid amount along with interest. These facts were brought to the notice of the Chief Commissioner of SGST by the Applicant but to no avail.

Held:

• The Hon’ble High Court after considering the submissions from the both sides, facts of the case and law applicable on the issue, observed that under IGST Act, a person having advance license shall be eligible for importing raw-material without payment of import duty. Further, Section 16(1)(a) provides export of goods as ‘Zero rated supply’ and Section 16(3) states that the person making ‘Zero rated supply’ shall be eligible to claim refund under a ‘bond’ or ‘Letter of ‘Undertaking’ without payment of IGST and claim refund of unutilized credit, Secondly, supply goods or services on payment of IGST and claim refund of the tax so paid.’
• That as per Rule 96(10) of the CGST Rules, a registered person importing raw-material without payment of import duty under the advance license shall not be eligible for utilizing accumulated ITC for payment of IGST on exports of goods or services.
• That in the present case the writ-applicant opted for second option i.e.,’ payment of IGST on export of goods’, however inadvertently utilized ITC for payment of IGST on export of goods, which is not permissible as per rule 96(10) of the CGST rules, and the amount of tax paid as IGST was automatically refunded. Later, on realizing the mistake the writ-applicant separately paid the requisite IGST with interest.
• That as far as, the erroneous grant of refund and such amount paid back by the writ-applicant along with interest, is not in dispute and this transaction is nullified. The amount in dispute is the ITC initially utilized for payment of IGST which as per the respondent authorities, the writ-applicant is not entitled for refund, as stated under rule 96(10) of the CGST rules.
• It was further observed that there is no question of refund of ITC at all, the issue involved in the matter is restoration of ITC in the electronic credit ledger and not a refund, hence reference to rule 96(10) on behalf of the respondent authorities is not tenable.
• That ‘If the authorities have accepted that there was an error and resultantly, accepted repayment of the erroneous refund, as a corollary, the credit of the ITC must be restored.’

The Hon’ble High Court without going into the merits of the case, disposed of the writ-application with the above findings and directed the respondent authorities to re-credit/restore the Input Tax Credit of Rs. 1,39,49,810/- in the electronic credit ledger of the writ-applicant within two weeks of the receipt of the order.

To read the complete judgment 2022 Taxo.online 378