Facts of the Case

The petitioner, Exxat Systems Pvt. Ltd., a private limited company providing information technology consulting and support services and registered under the Central/Gujarat Goods and Services Tax Act, 2017, exports services against foreign exchange, treated as zero-rated supply under Section 16 of the IGST Act. While the petitioner had exported without payment of tax (under bond/LoU) from July 2018 to March 2019, for June 2019 it exported services on payment of tax and filed a refund claim on that basis. Provisional refund of part of the amount was granted, but the final refund of Rs.10,41,355/- was rejected by order dated 17.02.2021 on the ground "Inadmissible (Entry Not Showing in Annexure B)" — a requirement that, per the petitioner, applies only to exports made without payment of tax. The authority separately passed an order for re-credit of the rejected amount in the electronic credit ledger, conditional on the petitioner giving up its right to appeal, but the GST portal did not permit the re-credit despite follow-up, prompting this writ petition.

Issues Involved

  1. Whether the refund application, filed for exports made on payment of tax, was wrongly processed as if it pertained to exports without payment of tax, requiring the "Annexure B" ITC details.
  2. Whether the order partially rejecting the refund, passed without a show cause notice or hearing, could be sustained.

Petitioner's Arguments

  • The refund application was for export of services with payment of tax, but the adjudicating authority processed it as if it were a claim for refund of unutilised ITC on export without payment of tax; the "Annexure B" requirement under the circular dated 18.11.2019 applies only to the latter category.
  • This error also caused the authority to be unable to give effect to its own order re-crediting the rejected amount in the electronic credit ledger.
  • No show cause notice or opportunity of hearing was given before the rejection; the impugned order should be quashed and the matter remitted for fresh processing, since the export of services and payment of tax were not in dispute.

Respondent's Arguments

  • The Additional Government Pleader submitted that, since the petitioner was only seeking remand to the adjudicating authority, an appropriate order could be passed by the Court in those terms.

Court Order/Findings

  • The adjudicating authority had processed the refund application as one for unutilised ITC on tax-free exports, though it was expressly for exports made on payment of tax — creating a situation where the refund was partly rejected and the corresponding re-credit order also could not be implemented.
  • The order partially rejecting the refund was passed without any show cause notice and was a non-speaking, cryptic order.
  • The order dated 17.02.2021, to the extent it rejected the refund, was quashed and set aside, and the matter remanded to the adjudicating authority for fresh decision on the rejected portion; the refund already granted was not disturbed.
  • As a precaution, the Court clarified that if the authority requires a fresh refund application for the rejected portion, it will be treated as a continuation of the original application, and limitation cannot be raised against it.
  • The entire exercise, including a fresh order, was directed to be completed within four weeks from receipt of the Court's order.

Important Clarification

  • Refund claims for exports made on payment of tax cannot be processed under the documentation requirements (such as "Annexure B") applicable to exports made without payment of tax under bond/LoU; doing so is an error vitiating the rejection.
  • A refund rejection order passed without a show cause notice or hearing, and without reasons, does not meet the standards of natural justice and is liable to be quashed on that ground alone, independent of the merits of entitlement.

Sections Involved

  • Section 16 of the Integrated Goods and Services Tax Act, 2017 – governs zero-rated supplies and the refund routes for exporters, whether on payment of tax or under bond/LoU.

Decision – In Favour of

Disposed of with directions, in favour of the Assessee to the extent of the natural-justice and procedural infirmities. The order rejecting part of the refund was quashed for want of a show cause notice and reasons, and the claim remanded for fresh adjudication within four weeks; the Court did not itself determine the petitioner's final entitlement to the refund.

Related Case Laws

No related case laws are available on this site at present.

Case Details

  • Court: High Court of Gujarat at Ahmedabad
  • Case No.: R/Special Civil Application No.6146 of 2022
  • Coram: Hon'ble Mr. Justice J.B. Pardiwala and Hon'ble Ms. Justice Nisha M. Thakore
  • Date of Order: 07.04.2022

Link to Download the Order

Download the full judgment (PDF)

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