SEZ entitled to GST refund as it falls within the meaning of ‘any person' under Section 54 read with Rule 89.

Facts: The Petitioner, a Special Economic Zone (SEZ) unit, has effected purchases  from several suppliers/vendors for the development of the SEZ. The Petitioner had filed applications for refund of the taxes erroneously remitted on various dates to its suppliers.  A show cause notice was issued where the locus of the Petitioner to claim the refund was questioned on ground that as per Section 54 of the CGST Act read with Rule 89 of CGST Rules, only a supplier of services would be entitled to claim refund and not the SEZ itself.

Repondent's Contention: The repondent refers to the provisions of Section 54 of the CGST Act dealing with applications for refund and Rule 89(1) of the Central Goods and Services Tax Rules, 2017 (CGST Rules), based upon that it was submitted that the an application for refund would be maintainable only if filed by the supplier of goods or services and not by any other entity including the recipients of the services, such as the petitioner SEZ before me.

Petitioner's Contention: The Petitioner contended there is no restriction placed on who might claim refund of tax. Admittedly, the supplies at issue in the present writ petitions are zero-rated and hence in view of the admitted position that the petitioner has, in fact, remitted taxes thereupon, there is no embargo on the refund sought. The reference in Section 54 is to ‘any person’ and would, according to the petitioner, include the SEZ as well.

In support of this argument, reference is made to Clause (g) of the Explanation at the foot of Section 54, which provides clarity on what the relevant date for filing of an application for refund would be, in cases of such applications being filed by an entity other than the supplier. Had the position been that only a supplier could seek refund, there would have been no necessity for such an Explanation in the first place.

Held: The Hon’ble Madras High Court held as under

• the statutory scheme for refund under the CGST Act and State GST Acts, permits any entity to seek a refund of taxes or other amounts paid under the CGST Act, subject to the satisfaction that is it so entitled and that there is no double claim as against the same amount. Ordinarily, though zero-rated supplies are not subject to the levy of taxes, the petitioner, in this case has remitted the same as raised in the invoice, albeit erroneously. The provisions of Section 54 of the CGST Act, providing for a refund, apply to any person who claims such refund and who makes an application for the grant of the same. The language of the provision is clear and does not contain, or admit of any restriction in its operation.
• Also, Rule 89(1) of the CGST Rules, 2017 does not indicate any restriction that the application of refund should only be filed by a supplier. No doubt, the second proviso refers to a supplier of an SEZ, which is only one kind of entity that may make an application under Rule 89. This is not to say that the reference to a supplier, will exclude, by virtue of such reference, other applicants.
• On combined reading of Section 54 and Rule 89 the restriction which has been read into the provision by the Revenue is in the view of the court has been misplaced. In fact, the Officer in the impugned order proceeds on the basis that the second proviso to Rule 89 deploys the word ‘only’, which Court do not find in the second proviso. It is a settled position that there can be no insertion of a word or phrase in a statutory provision or in a Rule which must be read and applied, as framed. No restrictions or amplifications of the Rule are permissible by interpretation. On the legal issue of entitlement to refund, the High Court held in favour of the petitioner.
• Further, on the question of quantification of the refund, the revenue has raised a legitimate apprehension; firstly, that such refund would be issued to the petitioner only if it is established that no such claim has been made by the supplier, and secondly, that the tax paid by the supplier to the SEZ has, in fact, been remitted to the treasury under the statutory returns filed by the SEZ. This is a matter of fact which the petitioner will have to establish before the respondent. This aspect of the matter finds reference in Section 54(4), extracted earlier in this order, which provides for the refund application to be comprehensive and accompanied by all relevant documentary evidence in support of the claim.

It was observed that the provisions of Section 54 of the CGST Act, providing for a refund, apply to any person who claims such refund and who makes an application for the grant of the same. Thus, it was held that in the present case, the Petitioner shall fall within the meaning of ‘any person’ as enumerated under Section 54 of the CGST Act and accordingly, shall be eligible to seek refund of the taxes paid by it.

Relevant Provisions:

Section 54(1) of the CGST Act-

54. “Refund of tax-

(1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed:

Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in the return furnished under section 39 in such manner as may be prescribed.”

To read the complete judgement 2021 Taxo.online 885