Facts of the Case

  • The Petitioner, M/s. TP Solar Limited, is a registered entity holding a valid Export Promotion Capital Goods (EPCG) Scheme licence.
  • Under the statutory framework of the EPCG scheme, imports effectuated using the licence are completely exempt from the payment of customs and associated taxes.
  • In instances where local procurement of capital goods is chosen in lieu of direct imports, such transactions are legally treated as "deemed exports". Any tax paid on these local supplies is eligible for a full refund, subject to the reversal of input tax credit (ITC) if it was previously availed.
  • The dispute arose because the machine supplier, while executing the billing and filing, committed an inadvertent administrative error. Instead of classifying the supply under the specific "deemed exports" column in the GST returns, the supplier erroneously declared the transactions under their "general turnover".
  • Consequent to this misclassification by the third-party supplier, the automated system on the common GST portal failed to process the transaction as a deemed export, leading to the electronic and system-driven rejection of the petitioner’s refund claim via the impugned order in Form GST RFD-06 dated 25.06.2025.

Issues Involved

  • Whether a bona fide recipient of goods can be denied a legitimate tax refund under Section 54 of the CGST Act solely due to an inadvertent reporting and classification error committed by the supplier in their tax returns.
  • Whether the mechanical rejection of a refund claim through the automated system on the common portal without evaluating the substantive merits of the transaction constitutes a violation of natural justice and principles of taxation.
  • Whether the matter warrants a physical/manual reassessment by the proper officer through alternative supplementary documentation, such as a Chartered Accountant's certificate, to prevent structural revenue loss or unjust enrichment.

Petitioner’s Arguments

  • The learned counsel for the petitioner, Mr. G. Natarajan, argued that the denial of the substantial refund claim is entirely inequitable as it stems strictly from an accidental clerical error made by the machine supplier, over which the petitioner had no operational control.
  • It was strongly contended that the petitioner should not be made to suffer financially or lose statutory benefits due to a reporting mismatch caused by a third party.
  • The petitioner explicitly stated that at the time of processing the final refund, any input tax credit (ITC) availed against the invoices would be fully reversed. Therefore, the state exchequer would face absolutely zero revenue loss.
  • To validate the authenticity, financial flow, and nature of the transactions, the petitioner expressed absolute willingness to procure and present a formal certificate issued by a practicing Chartered Accountant alongside all physical documentation.

Respondent’s Arguments

  • The learned Standing Counsel for the respondent department, Mr. P. Rajagopalan, argued that the rejection of the refund under Form GST RFD-06 was not arbitrary but was a direct outcome of the specific manner in which the claim was electronically presented and the incorrect supporting particulars furnished by the portal's data feed.
  • However, the respondent fairly conceded that if the petitioner puts forth comprehensive, tangible supporting documents to establish the transaction as a deemed export—specifically including a validated Chartered Accountant's certificate—the department would be fully prepared to manually review and reconsider the entire refund application on its merits in accordance with the law.

Court Order / Findings

  • The Single-Bench Court presided over by Hon'ble Mr. Justice D. Bharatha Chakravarthy reviewed the rival submissions and observed that the entire procedural hurdle and subsequent rejection arose purely from a classification error executed by the supplier.
  • The High Court determined that technical glitches or systemic mismatches caused by third parties should not override the substantive rights of a taxpayer, and the petitioner must be granted a fair opportunity to prove their claim on merits.
  • Consequently, the High Court set aside the impugned order dated 25.06.2025 and officially remitted the matter back to the respondent Assistant Commissioner (ST) for fresh manual consideration.
  • The Court directed the petitioner to submit a fresh, comprehensive representation along with a detailed Chartered Accountant’s certificate and all supporting transactional documents within a strict timeline of two (2) weeks from receiving the order copy.
  • Upon receipt of the fresh documents, the respondent is ordered to evaluate the claim completely afresh and pass speaking orders in accordance with the law after providing a personal hearing to the petitioner, concluding the entire exercise within a period of two (2) months thereafter. The Writ Petition was thus disposed of without any order as to costs.

Important Clarification

  • Substance Over Form: Procedural misclassifications or errors in return filing by a supplier cannot permanently extinguish the substantive statutory right of a buyer to claim a GST refund if the underlying transaction factually qualifies as a deemed export.
  • Cure via External Certification: Where automated common portal systems fail due to data mismatches, taxpayers can bridge the evidentiary gap by presenting definitive secondary proofs, such as a Chartered Accountant's certificate, to prove no revenue loss to the state and ensure the verification of matching inputs.

Section Involved

  • Section 54 of the Central Goods and Services Tax (CGST) Act, 2017: Deals with the provisions, timelines, and legal frameworks governing the claims and sanctions of tax refunds.
  • Article 226 of the Constitution of India: Invoke the extraordinary writ jurisdiction of the High Court for issuing a Writ of Certiorarified Mandamus.
  • Articles 19(1)(g) and 265 of the Constitution of India: Invoked by the petitioner regarding the fundamental right to practice any profession/trade and the constitutional mandate that taxes shall not be imposed save by authority of law.

Link to download the order - https://mytaxexpert.co.in/uploads/1783058007_306compressed.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.