The Hon’ble High Court of Gujarat vide its order dated 21.10.2022 in the matter of M/s. Chromotolab and Biotech Solutions Vs. Union of India in R/Special Civil Application No. 16308 of 2022, held that the date of filing the refund application by the assessee on Common portal would be treated as date of filing claim for refund under Section 54 and not the date when the application was physically submitted by the assessee with relevant documents.  Further it was held that the circular provided for procedure of filing application for refund cannot have an overriding affect to the detriment of the assessee.

The petitioner filed the writ petition before the Hon’ble High Court praying for directions to the respondents for re-credit amount of Rs.3,37,076/- in electronic credit ledger of the petitioner with interest from the date of order dated 19.11.2019 till its realisation.  Further prayer was also made to direct the respondent to pay the entire amount of refund claim and set aside the said order dated 19.11.2019, whereby the refund claim filed by the petitioner was rejected on ground that it was barred by limitation in terms of Explanation (2) (c) (1) of Section 54 of the Central Goods & Services Tax Act, 2017.

Facts of the Case: –

• The Petitioner is engaged in the business of trading and clearance of finished excisable goods, namely analytical instruments and consumables such as mass spectroscopy, standard and impurities machinery, laboratory products, force scientific columns, cole parmer, modular gas generators, etc., which are mainly used by the pharmaceutical companies.
• The petitioner supplied the goods to the pharmaceutical companies located in Special Economic Zone and issued tax invoices, the tax invoices were examined and admitted by the competent officer of the Special Economic Zone.
• The supply of goods by the petitioner was zero-rated supply in terms of Section 16 of IGST Act, 2017, which provides for mechanism to clear the goods for zero-rated supply either under bond or Letter of Undertaking. Sub- section (3) of Section 16 of IGST Act, shall be admissible if the goods are supplied on payment of IGST under Section 54 of the Central Goods and Services Tax Act, 2017.
• The petitioner for the supply of finished goods during the period August 2017 to October 2017, claimed refund under Section 54 of the CGST Act.  The Application for refund was filed on 28.12.2018 in FORM GST RFD – 01 on the Common portal under rule 89 (1) of the CGST rules, 2017 and the ARN acknowledgment was issued on the receipt of the application.
• Thereafter, the petitioner was served with a notice in the prescribed format under subrule (2) of Rule 90 of the CGST Rules, whereby the petitioner was asked to explain as to why the refund claim of Rs. 3,37,076/- should not be rejected on the ground of bar of limitation. The petitioner was also directed to appear before the respondent authority within three days on 19.11.2019.
• Later, to the surprise of the petitioner, the order dated 19.11.2019 came to be issued whereby the refund of Rs. 11,421/- was sanctioned rejecting the claim of Rs. 3,37,076/- on the ground that it was time barred.
• The petitioner through its communication dated 19.11.2019 to the Assistant Commissioner, CGST & Central Excise, stated that proper notice was not issued to the petitioner and the notice was even otherwise given after a lapse of one year without raising any query or point out any deficiency. Further an undertaking was also submitted by the petitioner on 31.12.2019, stating that they would not file an appeal against the rejection of refund claim and requested to give re-credit of the amount claimed.
• That on 03.03.2020, the respondent authority admitted the delay in re-crediting the amount in the electronic credit ledger on account of technical issue, but did not dispute the eligibility of recredit of the amount.
• The petitioner lodged its complaint on 04.03.2020 to Saksham Seva Help Desk, as suggested by respondent authority itself but in vain despite reminders. Hence, being aggrieved the present petition has been moved by the petitioner.

It was submitted on the behalf of the respondents that the application for refund was required to be filed as per the procedure laid down in Circular dated 15.11.2017.  Though, the petitioner filed the application on the Common portal on 20.12.2018 in FORM RFD – 01A, the printout of the application along with the relevant documents, as required by the said Circular, was submitted by the petitioner to the office of the respondents on 17.10.2019.  Accordingly, the submission of the printout of the application was after expiry of due date in terms of Explanation (2) of Section 54 of the CGST Act.  Therefore, the refund claim of the petitioner was partially rejected and the re-credit was not given as claimed.

Held: –

• The Hon’ble Court after considering the submissions made, facts of the case and law applicable, found that in the instant writ petition, short question which needs to be decided is whether the period of two years for filing refund claim under Section 54 of the CGST Act would be applicable up to date of filing application on common portal or date of submitting printout of application for refund uploaded on common portal.
• The Hon’ble Court after taking note of the law stated in Section 54, found that Sub-section (1) of Section 54 of the CGST Act provides that 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. Further prior to insertion of Explanation (2) (ba) by the Finance Act, 2022, the relevant date in the case of goods exported out of India by land, the date on which such goods pass the frontier. In the case of services exported out of India, the date of receipt of payment in convertible foreign exchange or in Indian rupees or issue of invoices, where payment of the services had been received in advance prior to the date of issue of the invoice, is treated as relevant date.
• Further, on perusal of Explanation 2 (ba) (inserted by Finance Act, 2022 in Section 54) and Rule 93 (Credit of the amount of rejected refund claim), it was found that the Respondents have relied upon the clause 4 of the Circular dated 15.11.2017, which provides that ‘application for refund of unutilised input tax credit on inputs or input services used in making zero-rated supplies shall be filed in FORM GST RFD01A in the common portal and the amount claimed as refund shall get debited in accordance with Rule 89(3) of the CGST Rules from the amount in the electronic credit ledger to the extent of the claim. The said circular lays down the procedure to file an application physically.’
• It was found by the Hon’ble Court that the complete case of the respondents is based on the fact that since the physical submission of the application along with documents was on 17.10.2019, it was beyond the period of two years and therefore time barred, counted from the relevant date.
• Further it was found that it is not in dispute that the petitioners filed their refund application in the common portal on 28.12.2018 and ARN was generated, however, nothing was done on the application by the respondents until the application was submitted physically with relevant documents on 17.10.2019. It was also found that it is not in dispute that the refund claim of the petitioner otherwise satisfied all requirements of Section 54 of the CGST Act and the attendant Rules and the petitioner was eligible to seek refund.  However, the refund claim was considered as time barred treating it as filed on 17.10.2019 and not on 28.12.2018.
• Thereafter, the Hon’ble Court on perusal of clause 3 of Circular dated 15.11.2017, relied upon by the respondents, found that the said circular provides that the refund claim application FORM GST RFD -01A is required to filed on Common portal as per the rules and the print out of the same has to be submitted to the jurisdictional officer with the necessary documents. In the instant case the petitioner filed the application on the common portal within time, however the documents along with application were physically submitted on 17.10.2019, on this ground only the claim of the petitioner is treated beyond limitation.
• It was found by the Hon’ble Court, that the Circular provides for procedure of filing application and filing of physical application with documents cannot have an overriding operation to the detriment of the assessee, who filed the refund application in the common portal of the respondents, which was acknowledged and ARN was also generated. The date of application filed on the portal has to be treated as one to reckon whether it was filed within two years as contemplated under Section 54 of the CGST Act.
• The Hon’ble Court took reference of Commissioner of Central Exercise, Bolpur Vs. Ratan Melting & Wire Industries [2008 (12) STR 416 (SC)], J.K. Lakshmi Cement Ltd. Vs. Commercial Tax Officer, Pali [2018(14) GSTL 497 (SC)], wherein it was held that the circular cannot alter the statutory provisions to the detriment of the assessee.
• Further reference was taken of the decision of the Hon’ble Court in M/s. Ayana Pharma Ltd. Through its Authorised Reps. Mulraj K. Chheda Vs. Union of India in SCA No. 14158 of 2021, wherein mode of electronic filing was recognized. In that case, the authority had rejected the manual application of refund on the ground that the provision was for electronic filing only.
• The Hon’ble Court with all the above discussions, held that the date of filing of the application by the petitioner on common portal would be liable to be treated as date of filing claim for refund to the satisfaction of requirement of Section 54 of the CGST Act and Rule 89 of the CGST Rules. The procedure evolved in Circular dated 15.11.2017 cannot operate as delimiting condition on the applicability of statutory provisions.

The Hon’ble Court with the above findings allowed the writ petition with the directions to the respondents to re-credit the amount of Rs.3,37,076/- in the electronic credit ledger of the petitioner with interest at the rate of 9% p.a. from the date of order of rejection of the claim, i.e., 19.11.2019 till realisation.

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