17.08.2022: Additional Evidence At The Appellate Stage To Be Accepted On Sufficient Cause Being Shown – Andhra Pradesh High Court

The Hon’ble High Court of Andhra Pradesh vide its order dated 05.08.2022 in the matter of Fedex Express Transportation and Supply Chain Services (India) Private Limited Vs. The Additional Commissioner, The Assistant Commissioner, The Principal Commissioner of Central Tax, Union of India  in Writ Petition No. 2478 of 2022 and Writ Petition No. 2498 of 2022, allowed the request of the petitioner to accept the additional evidence at the Appellate Stage considering it a fit case where discretion can be exercised for entertaining additional evidence at the belated stage, as the petitioner had exercised due diligence, but was still unable to produce such evidence during the original proceedings.

The Petitioner filed the present writ petitions requesting to declare the Order-in-Appeal No. VIZ-GST-000-APP-021- 21-22, dated 30.07.2021, whereby the appeal of the Petitioner was rejected by the respondents without considering the endorsement certificates, as illegal, improper, incorrect and violative of Article 14 and 19(1)(g) of the Constitution and to direct the respondents to grant refund to the Petitioner.

Facts: –

  • The Petitioner is a company registered under CGST Act, 2017 read with APGST Act, 2017, within the state of Andhra Pradesh and is primarily engaged in business of providing Express Courier Services the units in SEZ (Special Economic Zone).
  • The Petitioner during the period in dispute i.e., April, 2018 to July, 2018 and August, 2018 to March, 2019, made supplies to SEZ unit and being zero rated supplies, the petitioner was entitled for refund of input taxes paid for such supplies in view of Section 16 of IGST Act, 2017.
  • That an Application for refund was filed by the petitioner under Section 54 of the C.G.S.T. Act, 2017 read with rule 89, which was supposed to filed within two years from the relevant date, however, due to COVID Pandemic, the same was filed within the extended time, through various Notifications in that regard.
  • The case of the petitioner is that it filed refund claims in Form GST RFD – 01 on 28.08.2020 (Form GST RFD-01 on 30.08.2020 in W.P. No. 2478 of 2022) under Section 54 read with Notification No. 35/2020 (Central Tax) dated 03.04.2020 [Amended by Notification No. 55/2020 (Central Tax)] dated 27.06.2020, for the supplies made to SEZ units.
  • That for the purpose of filing the refund, the petitioner approached/corresponded with the service recipients i.e., SEZ units, to obtain endorsement certificates from the specified officer of their respective zone, however, the SEZ units were unable to obtain the same from the specified officer of SEZ due to restrictions imposed in wake of COVID pandemic. Therefore, as the refund claims to be filed on and before 31.08.2020, the petitioner filed the refund claim with necessary supporting documents, except endorsement certificate.
  • Thereafter, the petitioner received a show cause notice in RFD-08 dated 15.09.2020 [dated 14.09.2020 in W.P. No. 2478 of 2022], wherein the claim of the petitioner was denied on the ground that the endorsement certificates were not submitted, and the petitioner was directed to show as to why the refund claim should not be rejected for non-furnishing of endorsement certificates.
  • Subsequently, the petitioner filed a reply to the show cause notice on 30.09.2018, explaining as to why the endorsement certificates could not be submitted with the refund claim, however, the Authorities without considering the reply submitted by the petitioner rejected the claim of Rs.3,45,02,753/- [Rs.86,27,371/- in W.P. No. 2478 of 2022] for non-furnishing of endorsement certificates.
  • That against the said orders, the petitioner filed an Appeal No. 3/2021, dated 05.01.2021, [Appeal No. 04/2021, dated 29.01.2021] before the respondent authorities under Section 107 of the CGST Act, 2017, wherein the petitioner explained the difficulty in obtaining the endorsement certificates and requested to set-aside the refund rejection order.
  • That during the pendency of the afore-mentioned appeals, the petitioner requested the Development Commissioner of SEZ to help in obtaining endorsement certificates, finally was able to obtain endorsement certificate, dated 11.01.2021, from the specified officer of Ramky Pharmacity India Limited, for a substantial portion of the services provided to SEZ Units for authorized operations, and the copy of the same was submitted by the petitioner on 10.02.2021, as additional material, before the respondent authorities. However, the appeals were rejected without considering the submissions made, only on the ground of non-submission of endorsement certificate within the time specified and also along with refund claim.

Being aggrieved of said orders, the petitioner has filed the present writ petitions.

Petitioner’s Submissions: –

  • It was submitted on the behalf of the petitioner that when the statute provides for making an application with a delay and since the endorsement certificate could not be obtained from the specified officer due to COVID pandemic, the authorities should have accepted the request of the petitioner, when the petitioner has been continuously corresponding with the respondents expressing the difficulty in obtaining the certificate.
  • That relying on the judgment of Hon’ble Supreme Court in Madanlal V. Shyamlal (2002) 1 SCC 535, it was submitted that the expression ‘sufficient cause’ should be given a liberal interpretation to ensure the substantial justice is done.
  • That the impugned order is in violation of principles of natural justice and violative of Article 14 of the Constitution of India. Further after causing due diligence, the endorsement certificate could not be obtained by the petitioner at the time of filing of refund application, however, the same was filed during the pendency of appeal.  Therefore, the reason for not furnishing the endorsement certificate along with refund application within the prescribed time, cannot be brushed aside when the statute itself provides that the petitioner is entitled for refund under Section 24, and rule 112, which prescribes for filing of application even in appeal.
  • Referring to the finding of the Appellate Authority that ‘accepting a document at a belated stage is the discretion of the authority’, it was submitted that impugned order requires to set-aside and the matter needs to be remanded back to the Appellate Authority for fresh consideration after taking into consideration the endorsement certificate of Ramky Pharmacity India Limited.

Respondents’ Submissions: –

  • On the other hand, it was submitted on the behalf of the respondents that when the Statute provides a thing to be done in a particular manner, the same has to be done in that manner alone.
  • That the petitioner could have obtained the endorsement certificate much prior and taking the plea of COVID now, is an afterthought and cannot be accepted.
  • Referring to rule 89 of the C.G.S.T. rules, 2017, it was submitted that in absence of endorsement certificate, it cannot be established that the impugned supplies are consumed for specified purpose, so that refunds can be considered.
  • The Petitioner ought to have secured and submitted the endorsement certificate with the refund application, and as the Limitation Act is not applicable to the instant case, accepting the documents at the belated stage in the absence of any reasonable explanation, cannot be permitted. Thus, the order under challenge warrants no interference and the Writ petitions are liable to be dismissed.

 Held: –

  • The Hon’ble Court taking the Writ petition no. 2498 of 2018 as a lead petition and after considering the submissions made from the both side, facts of the case, law applicable, found that the fact that the Petitioner did not file the endorsement certificate with the refund application is not in dispute. Further it is also not in dispute that against the refund rejection orders the petitioner filed an appeal before the respondent authorities, and the endorsement certificate issued by the specified officer was not submitted with the appeal, though, was submitted during the pendency of appeal, with an application requesting to accept the same.
  • It was found that the correspondence placed on record, shows the efforts made by the petitioner to obtain the endorsement certificates. The Petitioner has been in continuous touch with its recipients SEZ units i.e., Pfizer, Hobel Bellows, Astrotech Steels, MSR Garments and Ramky Pharmacity India Limited, however, could not obtain the endorsement certificate from Ramky Pharmacity India Limited. Therefore, it cannot be said that the Petitioner kept quiet without pursuing its remedies.
  • The Hon’ble Court considering the submission made on the behalf of the respondents that ‘the petitioner ought to have obtained endorsement certificate much prior to arrival of COVID in India’, found that non obtaining the endorsement certificates prior to COVID pandemic cannot be ground to reject the claim, when the whole country was swept by the pandemic during the relevant period. Therefore, the petitioner efforts to obtain endorsement certificate within the time prescribed, cannot be brushed aside.
  • Thereafter, the Hon’ble Court taking note of law stated in Rule 112 of the CGST Rules, found that a plain reading of rule 112 make it clear that the Appellate Authority has got all the powers to accept additional evidence adduced by the Appellant when he is prevented by ‘sufficient cause’ from producing the material before the assessing officer. Reference was made to the decision of State of Gujarat in Avichal Press Pvt. Ltd V. Assistant Commissioner of Income Tax (2012) SCC Online Guj 6179, wherein the similar issue was dealt with and the assessee was permitted to produce the additional evidence.
  • That from the perusal of Rule 112(4), it is clear that the powers of the Appellate Authority or the Appellate Tribunal to direct production of any document, to enable it to dispose of the appeal, is not affected. Further Section 107 (11) of the C.G.S.T. Act, which is akin to Section 250 of the Income Tax Act, prescribes that before disposing of the Appeal, the Appellate Authority may make any further inquire as it thinks fit.
  • It was found that from the above referred judgment and provisions of law, it is copious clear that the Appellate Authority has got power to accept additional evidence on record, in a given set of circumstances. That it is at the discretion of the Appellate Authority to entertain the additional evidence, on sufficient cause or reasoning being shown for the non-submission of documents at the lower stage, or if the opportunity was not granted to file the documents. 
  • It was found that the circumstances on which discretion can be exercised for entertaining the additional evidence at the belated stage, squarely fits the instant case. Therefore, on this ground also the Appellate Authority ought to have accepted the request of the Petitioner.
  • Lastly, the Hon’ble Court considering the contention put forth by the Petitioner that ‘no opportunity was given to it to explain the rejection of the claim, had an opportunity been given or a notice was given asking the Petitioner to explain, it would have explained to the Appellate Authority that the claim made was relevant’ held that the said argument of the Petitioner cannot be brushed aside.

The Hon’ble Court with the above findings, allowed the request of Petitioner to accept the endorsement Certificate dated 11.01.2021 given by the specified officer of Ramky Pharmacity India Limited, as well as allowed the Writ Petitions, setting aside the impugned order dated 30.07.2021. The matters are remanded back to the Appellate Authority to decide it afresh after accepting the application filed by the petitioner for additional evidence.

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