Facts of the Case

The petitioner, M/s CTC (India) Private Limited, is a 100% Export Oriented Unit engaged in exporting its products to various countries including the USA, China, and Germany. The company filed an application seeking refund of accumulated CGST, SGST and IGST Input Tax Credit amounting to ₹9,89,191 for January 2018.

While filing GSTR-3B for January 2018, the petitioner inadvertently showed the value of zero-rated outward supplies as Nil, although the actual export turnover of ₹3,79,82,605 had been correctly disclosed in GSTR-1.

The refund application was rejected by the adjudicating authority on the ground that, as per GSTR-3B, the value of zero-rated supplies was shown as zero, resulting in a nil refund under the prescribed formula. The appellate authority also dismissed the appeal, following which the petitioner approached the Jharkhand High Court seeking quashing of both the adjudication and appellate orders and direction for grant of refund.

Issues Involved

  1. Whether refund of accumulated ITC can be granted when GSTR-3B reflects zero value of zero-rated supplies despite GSTR-1 showing export turnover.
  2. Whether refund authorities were justified in rejecting the refund claim for lack of supporting documentary evidence.
  3. Whether rejection of the refund claim violated the principles of natural justice due to alleged denial of personal hearing.
  4. Whether refund can be allowed merely on the basis of return entries without documentary corroboration.

Petitioner's Arguments

The petitioner contended that:

  • The omission in GSTR-3B was merely an inadvertent clerical error.
  • The actual export turnover had been correctly disclosed in GSTR-1 through export invoices.
  • Rule 89(4) excludes exempt supplies while computing adjusted total turnover and the authorities ignored this legal position.
  • The refund authorities failed to consider the documents and explanations furnished by the petitioner.
  • The refund claim was rejected without proper appreciation of facts.
  • Adequate opportunity of hearing was allegedly not provided before passing the rejection order.
  • Therefore, both the refund rejection order and the appellate order deserved to be quashed.

Respondents' Arguments

The Department submitted that:

  • Refund under Rule 89 is calculated strictly according to the prescribed statutory formula.
  • Since GSTR-3B declared the value of zero-rated supplies as Nil, the admissible refund necessarily worked out to zero.
  • Personal hearing had in fact been granted on 31.01.2019, which was attended by the petitioner's authorised representatives.
  • Certain ITC was inadmissible under Section 17(5) of the CGST Act.
  • The petitioner failed to produce documentary evidence substantiating its claim of zero-rated exports before the adjudicating authority as well as before the appellate authority.
  • Mere assertions without supporting documents could not justify sanction of refund.

Court Order / Findings

The Jharkhand High Court dismissed the writ petition and upheld the orders of the adjudicating authority and the appellate authority.

The Court observed that:

  • The petitioner failed to produce documentary evidence supporting the refund claim before the adjudicating authority, appellate authority, as well as before the High Court.
  • Refund of unutilized ITC relating to zero-rated supplies must be supported by proper documentary evidence establishing the genuineness of the claim.
  • Mere entries in returns or assertions made in pleadings cannot substitute statutory documentary proof.
  • The appellate authority had rightly relied upon Circular No. 37/11/2018-GST, which requires verification of export invoices before sanctioning refund.
  • The plea regarding violation of principles of natural justice was rejected since personal hearing had admittedly been granted and attended by the petitioner's representatives.
  • In absence of corroborative documentary evidence, the refund authorities were justified in rejecting the refund application.

Accordingly, the writ petition was dismissed.

Important Clarification

This judgment reiterates that:

  • Refund claims under Section 54 for zero-rated supplies cannot succeed merely because exports are reflected in GSTR-1.
  • Documentary evidence supporting export transactions and refund entitlement is mandatory.
  • Refund authorities are entitled to reject claims where statutory proof is not produced.
  • Personal hearing requirements stand satisfied where an opportunity has actually been granted and availed.
  • The burden of proving entitlement to GST refund lies upon the claimant taxpayer.

 

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785391375_2303compressed.pdf

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