Facts of the Case

The petitioner, Uma Polymers Ltd., a public limited company registered under GST, filed a refund claim of IGST amounting to ₹32,65,200 in respect of deemed exports.

The GST Department issued a show cause notice stating that the refund was not admissible under Section 54 of the CGST Act, 2017, alleging that the petitioner had failed to comply with the procedure prescribed under Paragraph 41 of Circular No. 125/44/2019-GST dated 18.11.2019.

In reply, the petitioner explained that it had not availed Input Tax Credit (ITC) relating to the relevant invoices. However, while filing the online refund application, the GST portal automatically debited the Electronic Credit Ledger due to a technical issue. To neutralize the effect of this system-generated debit, the petitioner subsequently obtained re-credit of the wrongly debited amount and contended that no ITC benefit had actually been availed.

Despite the explanation, the refund was rejected through orders dated 03.04.2020 and 06.11.2020, leading to the filing of the writ petition before the Gauhati High Court.

Issues Involved

  1. Whether the petitioner's refund claim for IGST on deemed exports could be rejected merely on account of non-compliance with the procedural requirements contained in Circular No. 125/44/2019-GST.
  2. Whether the technical debit made by the GST portal to the Electronic Credit Ledger amounted to availment of Input Tax Credit.
  3. Whether the refund claim required reconsideration in view of CBIC Circular No. 147/03/2021-GST dated 12.03.2021, which clarified refund-related issues concerning deemed exports.

Petitioner's Arguments

  • The petitioner had not availed Input Tax Credit on the relevant invoices.
  • The debit in the Electronic Credit Ledger occurred automatically due to a technical issue while filing the online refund application.
  • The petitioner obtained re-credit of the wrongly debited amount to rectify the portal error.
  • Therefore, the petitioner remained eligible for refund under Section 54 of the CGST Act, and rejection of the claim on procedural grounds was unjustified.

Respondent's Arguments

The GST Department submitted that the Central Board of Indirect Taxes and Customs had subsequently issued Circular No. 147/03/2021-GST dated 12.03.2021, clarifying various refund-related issues, including refunds concerning recipients of deemed export supplies.

The Department informed the Court that it was willing to reconsider the petitioner's refund claim in accordance with the said Circular.

Court Order / Findings

The Gauhati High Court accepted the statement made on behalf of the GST Department and directed the Assistant Commissioner, GST, Guwahati to undertake a fresh examination of the refund claim strictly in accordance with CBIC Circular No. 147/03/2021-GST dated 12.03.2021.

The Court further directed that:

  • A reasoned speaking order shall be passed within one month from receipt of the certified copy of the Court's order.
  • If necessary, the petitioner shall be granted an opportunity of hearing and permitted to produce relevant documents.
  • The impugned orders dated 03.04.2020 and 06.11.2020 shall remain inoperative until the fresh reasoned order is passed.
  • The Court clarified that it had not expressed any opinion on the merits of the refund claim and had only directed reconsideration in light of the subsequent CBIC Circular.

The writ petition was accordingly disposed of.

Important Clarification

  • Subsequent CBIC refund clarification circulars can materially affect pending refund disputes.
  • Technical issues on the GST portal should be examined on their own facts and should not automatically deprive a taxpayer of refund eligibility.
  • Authorities are required to pass a reasoned speaking order after considering applicable circulars and granting an opportunity of hearing wherever necessary.
  • The Court emphasized reconsideration based on the latest clarification without deciding the refund claim on merits.

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785403692_2398compressed.pdf

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