🧠 HeadNote & Summary
(2023) taxcode.in 67 HC
IN THE HIGH COURT OF KARNATAKA
Sungrow Developers India Pvt. Ltd.
v.
Union of India and Ors.
Writ Petition No. 12657 of 2022 (T-Res)
Decided on 23-Feb-23
Mr Justice B M Shyam Prasad
Add. Info:
For Appellant(s): Sri. Harish V.S., Advocate.
For Respondent(s): Sri. Jeevan J Neeralgi, Advocate.
Judgment/Order:
ORDER
The petitioner is aggrieved by the third
respondent’s orders dated 22.04.2022 [as per Annexures-K to K5 series in Form GST-RFD-05], and these orders are under Rule 92 of the Central Goods and Services Tax Rules 2017 (for short, ‘CGST 2017 Rules’). These impugned orders relate to the petitioner’s claim for refund for the period between April 2021 and September 2021. The petitioner has also called in question the show cause notice dated 25.04.2022 [Annexure – L] issued under Section 74 of Goods and Services Tax Act 2017 (for short, ‘GST Act’) read with Rule 100(2) and 142 (1)(A) of the Goods and Services Rules 2017 (for short, ‘GST Rules, 2017’) and the Endorsement dated 13.06.2002 [Annexure – N] issued rejecting the petitioner’s request for restoring the credit of IGST in a sum of Rs.52,44,57,242/-. The petitioner, as a consequential relief, has sought for refund of Rs.52,44,57,242/- or restoration of the credit for this amount in its Electronic Credit Ledger while also claiming interest in a sum of Rs.2,35,72,225/-.
2. The petitioner contends that it has affected exports until 29.04.2021 availing benefit under the Advanced Authorization Scheme ‘without payment of integrated tax’ with accumulated and unutilized ITC of RS.49,99,50,702/-. However, thereafter the petitioner, on advice, chose the option of exporting ‘with payment of integrated tax’ so that it could exhaust the accumulated and unutilized ITC, and because of this change, the petitioner, instead of filing application for refund of accumulated and unutilized ITC, claimed set off. The value of the petitioner’s exports for the period between April 2021 and September 2021 is in a sum of RS.10,48,29,08,881/- with IGST liability of Rs.52,44,57,242/-, and because of accumulated and unutilized ITC [68,96,95,071], the petitioner was entitled to receive refund of Rs.52,44,57,242/-.
3. In the month of September 2021, the petitioner is allowed refund of only Rs.40,31,13,682/- and the petitioner’s claim for refund Rs.12,13,43,560/- [Rs.52,44,57,242/- minus Rs.40,31,13,682/-] is blocked under Rule 96 (3) of the CGST Rules 2017. It is undisputed that the refund of this amount of Rs.12,13,43,560/- is blocked on the ground that the petitioner had availed benefit under the Notification in No. 79/2017- Customs dated 13.10.2017 alleging that the petitioner had availed double benefit in contravention of Rule 96(10) of the CGST Rules 2017.
4. The fourth respondent on 30.11.2021 has issued summons as part of investigation into the petitioner’s claim for refund, and during these proceedings, the petitioner, on 10.12.2021, has repaid the amount of Rs.40,31,13,682/- received as refund. Further on 24.12.2021, the petitioner has also deposited a sum of Rs.2,35,72,225/- as interest. According to the petitioner, these repayments are voluntary, and these deposits are made in terms of Section 73(5) of the Central Goods and Services Tax Act 2017.
5. The petitioner on 15.03.2022 has filed applications in FORM-GST-RFD-01 under Section 54 of CGST Act and Rule 89 of CGST Rules, 2017 for the months of April to September 2021. The third respondent has issued notices for rejection of these applications, and the petitioner, who requested for personal hearing, has not filed objections to such notices because of certain technical glitch. The third respondent has rejected the petitioner’s application by the impugned orders dated 22.04.2022 [Annexure – K Series] on the grounds that there is contravention of Rule 96(10) of the CGST Rules 2017 and that an investigation is underway. The petitioner has filed further representations but to no avail, and hence, the present petition.
6. Sri Harish V.S., the learned counsel for the petitioner, does not dispute that the petitioner could not have sought for refund under Section 16(3)(b) of the IGST Act because of the provisions of Rule 96(10)(b) of the CGST Rules as it stood at the relevant point of time inasmuch as the petitioner cannot dispute that it had availed the benefit of Advanced Authorization Scheme notified vide Notification No.78/2017. However, Sri Harish V.S canvasses that the third respondent has issued the impugned orders dated 22.04.20221 rejecting the petitioner’s applications without considering relevant circumstances. The applications, in the circumstances of the case, should have been considered as filed under Section 16(3)(a) of the IGST Act.
7. Sri Harish V.S. elaborates that when a registered assessee is engaged in Zero Rated Supply, given the provisions of Section 16(3) of the IGST Act as it stood at the relevant time, the assessee had the option of making an application for refund of unutilized ITC based on a Letter of Undertaking filed at the time of export2 or pay IGST and claim refund of such amount3. The petitioner, in exhausting the accumulated and unutilized ITC to his credit in a sum of Rs.52,44,57,242/-, has paid integrated tax and has made a request for refund by way of a deemed application which would be under Section 16(3)(b) of the IGST Act. However, in view of the provisions of Rule 96(10)(b) of the IGST Rules, the petitioner could not have had recourse to the option under Section 16(3)(b) of the IGST Act, and upon realizing the same during the course of hearing extended as part of investigation, the petitioner has repatriated the amount received as refund with interest. Consequentially, the petitioner has filed applications for refund which must be considered under Section 16(3)(a) of the IGST Act as it stood then read with Section 54 of the CGST Act.
8. As regards the petitioner’s claim for restoring ITC credit, Sri Harish V.S submits that if it could have been argued that as of the date of the petition the petitioner could not have exhausted ITC at the time of export because of Rule 96(10)(b) of the CGST Rules, which disables a person to claim refund if the benefit of Advanced Authorization Scheme is availed in terms of the Notification No.78/2017, presently Rule 86 4B is inserted. He argues that in terms of this Rule, when a registered person deposits the amount refunded erroneously in contravention of Rule 96(10) of the CGST Rules, the proper officer shall re-credit to the person’s Electronic Cash Ledger, the amount refunded by an order in FORM GST PMT03A, either on its own volition or when pointed out.
9. Sri Harish V.S submits that the petitioner, because of the circumstances, must be given, under the inserted Rule 86 4B of IGST Rules, the benefit of re-credit of Rs.52,44,57,242/- to the Electronic Credit Ledger subject to effective consideration of the petitioner’s application dated 15.03.2022 which is essentially filed under Section 16(3)(a) of the CGST Act 2017 as it stood at the relevant date.
10. Sri Jeevan J.Neeralgi, the learned counsel for the respondents, does not dispute that during the pendency of this petition Sub Rule 4B has been inserted into Rule 86 of CGST Rules and consequentially if there is a debit from Electric Cash Ledger, the assessee would be entitled to re-credit of the amount debited from the Electronic Cash Ledger but emphasizing that it should be re-credited to the Electronic Credit Ledger.
11. It is obvious from these submissions that because of the change in statutory provisions, the petitioner’s prayer for re-credit to the Electronic Credit Ledger a sum of Rs.52,44,57,242/- could be re-considered and that there must be appropriate direction to the proper officer viz., the Deputy Commissioner of Central Tax, North – West Division, Bengaluru West Commissionerate Bengaluru in this regard. This leaves the next question for consideration viz., whether the impugned orders as per Annexure-K series can be sustained and if it cannot be sustained, what orders will have to be made.
12. The third respondent has rejected the petitioner’s applications for refund only on the ground that there is contravention of Rule 96(10) of the CGST Rules, 2017. It remains indisputable that the petitioner, upon realizing that it could not have claimed refund under Section 16(3)(b) of the IGST Act, 2017 and after repatriating refund permitted in a sum of Rs.40,31,13,682/- along with interest, has filed applications under Section 16 of the IGST Act, 2017. The provisions of Section 16(3)(a) of the IGST Act as it stood at the relevant time enabled a registered person making a ZeroRated Supply, as in the case of the petitioner, eligible to claim refund without payment of integrated tax subject to conditions mentioned therein. The third respondent should have considered the indisputable fact of refund, later repatriation of refund and filing of separate applications for refund later under section 16(3)(a) of the IGST Act.
13. Therefore, on this limited ground the impugned orders as per Annexure-K series cannot be sustained and the petitioner must succeed on this score lest it be an impediment for the proper officer – – the Deputy Commissioner of Central Tax, North – West Division, Bengaluru West Commissionerate Bengaluru – to reconsider the petitioner’s request for re-credit in accordance with law and in the light of the fact that the petitioner has repatriated the amount that is credited to him along with interest and that there is a direction by this Court as part of this order to consider recrediting a sum of Rs.52,44,57,242/- to the petitioner’s Electronic credit ledger. For an effective consideration, the petitioner would be eligible for personal hearing and must also be at liberty to file a detailed statement enclosing a certified copy of this order.
14. At this stage, Sri Harish V.S. submits that in view of the provisions of section 54(7) of the CGST Act, 2017 the petitioner would be entitled for interest in the event there is a refund for the period commencing from the expiry of 60 days from the date of the applications. He further submits that the petitioner is entitled to such interest because the petitioner’s refund is not relatable to the Rule 96(10) of CGST Rules which apply when there is a deemed application under section 16(3)(b) of the IGST Act and when there is an application under Section 16(3)(a) of the IGST Act, the refund will be under Rule 89 of the CGST Rules 2017 subject to Section 54. As against these submissions, Sri Jeevan J Neeralagi submits that the petitioner’s applications for refund is revived only consequent to this order and in that event, the question of interest will have to be necessarily examined in the light of the provisions of proviso to Section 56 of the CGST Act 2017.
15. The petitioner’s prayer for interest that would be admissible is contingent upon the consideration of the application for refund and because this is contingent, the question of interest must also be considered by the Deputy Commissioner of Central Taxes, North – West Division, Bengaluru West Commissionerate, Bengaluru and is left open for consideration strictly in accordance with the law. Therefore, the following
ORDER
a) The petition is allowed in part, and the impugned Annexure-K series dated 22.04.2022 are quashed restoring the petitioner’s application dated 15.03.2023 for reconsideration by the Deputy Commissioner of Central Taxes, North – West Division, Bengaluru West Commissionerate Bengaluru for reconsideration after due personal hearing to the petitioner. Consequently, the other impugned Annexures – L and N are quashed.
b) The petitioner shall be at liberty to file supplementary application/ submissions in the light of the present proceedings and this order.
c) The Deputy Commissioner of Central Tax, North – West Division, Bengaluru West Commissionerate, Bengaluru is also called upon to recredit a sum of Rs.52,44,57,242/- to the petitioner’s Electronic Credit Ledger as contemplated under Rule 86 (4B) of the CGST Rules,2017 subject to the decision on the petitioner’s application now restored for reconsideration.
d) The Deputy Commissioner of Central Taxes, North – West Division, Bengaluru West Commissionerate, Bengaluru is also called upon to consider the question of refund of the interest in a sum of Rs.2,35,72,225/- simultaneously with the consideration of the petitioner’s application for refund.
Sd/-
JUDGE
References:
1. As per Annexure-K series
2. As contemplated section 16(3)(a) of the IGST Act without paying integrated tax
3. As contemplated section 16(3)(b) of the IGST Act after paying integrated tax
Original judgment copy is available here.
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