The Hon’ble High Court of Madras vide its order dated 03.11.2022 in the matter of ABI Egg Traders Represented by Its Proprietrix Panneerselvam Thatsayini Vs. Assistant Commissioner, Salem II Division, O/O, The Assistant Commissioner of Goods and Service Tax Central Excise, Salem – W.P. No. 3773 of 2020, set aside the order rejecting the refund claim filed by the assessee, finding that error in the filing of refund was bonafide and inadvertent, and there is no dispute as to the entitlement of the assessee to refund.

Facts of the case: –

• The petitioner is a sole proprietary engaged in the export of eggs. The export of eggs being ‘nil’ rated, there was no liability to pay tax.  Hence, the petitioner was entitled to the Input Tax Credit that had accumulated on the exports.  Further the disputed period in the instant matter is 01.08.2017 – 31.03.2018, in respect of which a return in form GSTR – 3B was filed in May, 2018.
• That ITC which was available in the Electronic Credit Ledger was Rs. 7,04,851/-, however, according to the petitioner after filing or return, ITC was enhanced to Rs. 11,63,200/.
• That a claim of refund of ITC amounting to Rs. 11,63,200/- as on date of filing of return, was made on 12.08.2019 under Section 54(3) of the CGST Act, 2017 read with Section 16(3) of the IGST Act, 2017.
• Pursuant to the filing of refund claim, a deficiency notice was issued to the petitioner on 05.09.2019 pointing out the errors in filing of refund application. The officer pointed out the discrepancies in the refund filed, informed that the refund claim was filed under the ‘residuary category’ and the credit balance as on 31.03.2018 was only a sum of Rs.7,04,851/- whereas the petitioner had claimed a refund for a sum of Rs.11,63,200/-.
• That the petitioner duly responded to the said deficiency notice on 09.10.2019 and submitted that it was not allowed to file the refund claim in the category of ‘payment without payment of tax’ and thus, the eventually the refund was filed under the category of ‘residuary category.’ Further with respect to quantum of ITC, it was submitted that the petitioner is entitled for refund for the credit in the ECL as on the date of refund application being 19.05.2019 and not the credit as on 31.03.2018.
• It was also submitted by the petitioner that the return in GSTR – 3B itself was filed in May, 2018 and it is only at that point the balance in ECL would stand enhanced from a sum of Rs.7.04 lakhs to Rs.11.63 lakhs. Further this was followed by an exchange of communications and show cause notices primarily on the same issues as discussed above.
• Thereafter, an order was passed rejecting the refund claim filed by the petitioner, wherein the response with regard to quantum of ITC seems to be accepted, however, the refund claim was rejected on the sole ground of being filed under the ‘residuary category’.

Petitioner’s Submissions: –

• It was submitted on the behalf of the petitioner that a mistake had occurred while filing of refund application and the petitioner instead of opting for exports ‘without payment of tax’, had opted for the column ‘with payment of tax’.
• It was submitted that the applicable category in the present case is ‘export of services-without payment of tax’. However, this ground was not available to the petitioner since the refund application, when correlated with the return filed under Section GSTR-3B did not permit the assessee to take a stand contrary to that taken in that return.  Thus, the petitioner was constrained to opt for ground (k) being the residuary ground.

On the other hand, the entitlement of the petitioner to the refund claim was not disputed on the behalf of the respondent.  Moreover, it was admitted that the error is bonafide and it was reiterated that the petitioner is, in fact, entitled to the refund of ITC seeing as the export was not liable to tax.

Held: –

• The Hon’ble Court after considering the submissions made and facts of the case, held that rejecting the refund solely on the inadvertent error that has come to the knowledge, would be hypothetical and conclusion of the officer to this effect is thus set aside.
• Further the same respondent officer, while passing the order has taken a lenient view in the case of another assessee by name ‘Shri Shakti Exports’ wherein refund, as sought in similar circumstances has been granted.

The Hon’ble Court with the above findings, set aside the impugned order.  The officer shall issue the refund within a period of eight (8) weeks from today after satisfying himself in regard to the quantum of refund as on the date of refund of application.