Facts of the Case

The Petitioner, M/s MSN Laboratories Pvt. Ltd., is engaged in the manufacture and export of pharmaceutical products. After the implementation of the GST regime, the Petitioner migrated to GST and obtained registration under the CGST Act.

The Petitioner supplied goods to a Special Economic Zone (SEZ) unit on payment of IGST. Since such supplies qualify as zero-rated supplies, the Petitioner became eligible to claim refund of the IGST paid under the GST law.

At the relevant time, the electronic refund filing facility was not fully operational. Therefore, as per the then-prevailing procedure, the Petitioner filed refund applications in Form GST RFD-01A, submitted printouts physically before the jurisdictional authorities, and obtained acknowledgments.

Subsequently, when the Petitioner attempted to submit supporting documents, the Department declined to accept them, stating that, pursuant to a CBIC Circular, refund applications along with supporting documents had to be filed electronically from 26.09.2019 onwards. Thereafter, the refund applications were rejected on the ground of non-submission of the required documents, leading the Petitioner to challenge the rejection orders before the High Court.

Issues Involved

  1. Whether rejection of the GST refund applications for alleged non-submission of supporting documents was justified.
  2. Whether the Petitioner was entitled to seek refund of IGST paid on zero-rated supplies made to an SEZ unit.
  3. Whether the refund claim could be reconsidered by permitting the filing of a fresh application in accordance with the applicable CBIC Circular.

Petitioner’s Arguments

  • The Petitioner contended that supplies made to the SEZ unit constituted zero-rated supplies, making it eligible for refund of the IGST paid.
  • It submitted that the refund applications had already been filed manually in the prescribed form because the electronic refund module was unavailable at that time.
  • The Petitioner argued that it had attempted to furnish the supporting documents, but the Department refused to accept them after introducing the revised electronic filing procedure.
  • It was further contended that the rejection orders were issued without effectively considering the refund claims and supporting circumstances.

Respondent’s Arguments

  • The Department submitted that although refund applications had been initiated, the Petitioner failed to submit the required physical copies along with supporting documents before the jurisdictional authority.
  • According to the Department, without the supporting documents, the refund sanctioning authority could not process the applications or issue a speaking order.
  • The Department further argued that the refund applications had already been rejected due to non-compliance with the prescribed procedure and that the Petitioner approached the authorities after considerable delay.
  • It was also contended that there was no violation of the principles of natural justice because the refund applications themselves were incomplete.

Court Order / Findings

The Andhra Pradesh High Court noted that during the hearing, both parties agreed that the Petitioner could submit a fresh refund application in accordance with CBIC Circular No. 125/44/2019-GST dated 18.11.2019.

Accordingly, the Court disposed of the writ petition with the following directions:

  • The Petitioner shall file a fresh refund application along with all necessary supporting documents within three weeks.
  • Upon receipt of the application, the concerned GST authorities shall examine the claim on merits and in accordance with law.
  • The authorities were directed to dispose of the refund claim preferably within three weeks thereafter.

The writ petition was accordingly disposed of without any order as to costs.

Important Clarification

  • Supplies made to an SEZ unit constitute zero-rated supplies, making the supplier eligible to claim refund subject to compliance with statutory requirements.
  • Where procedural changes occur in the GST refund mechanism, refund claims may be permitted to be refiled in accordance with the applicable CBIC Circulars.
  • The Court emphasized adjudication of the refund claim on merits after submission of a fresh application with complete supporting documents rather than denying the claim solely on procedural grounds.

Sections Involved

  • Section 54 of the Central Goods and Services Tax Act, 2017
  • Rule 89 of the Central Goods and Services Tax Rules, 2017
  • Section 16(1)(b) of the Integrated Goods and Services Tax Act, 2017
  • Section 7(5) of the Integrated Goods and Services Tax Act, 2017

Link to Download the Order  https://www.mytaxexpert.co.in/uploads/1785391576_2311compressed.pdf

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