Facts of the Case

The petitioner, Five Star Metals (P) Ltd., had purchased a passenger motor vehicle involving taxable value exceeding Rs.2 lakh and had not claimed Input Tax Credit for its value. Under pressure of case proceedings (Ext.P3) and an intimation (Ext.P4) alleging wrongful ITC availment, the petitioner paid Rs.4,61,942/- demanded by the State Tax Officer. On verification, however, it was confirmed that the petitioner had never claimed ITC on the vehicle, and the first respondent, by intimation dated 05.08.2020 (Ext.P8), certified to the second respondent that the petitioner was eligible for refund of the amount mistakenly paid. Despite this, the amount remained unrefunded, with the second respondent citing lack of proper adjudication and issuing a deficiency memo in Form GST RFD-03.

Issues Involved

  1. Whether the petitioner was entitled to refund of GST paid under a mistaken belief that it had claimed ITC on a passenger vehicle, when in fact no such credit had been availed.
  2. Whether the refunding authority could withhold payment despite the assessing authority's own certification of eligibility, citing lack of formal adjudication.

Petitioner's Arguments

  • The amount of Rs.4,61,942/- was paid under Exts.P3 and P4 based on an incorrect premise that ITC had been claimed on the vehicle purchase, when in fact no ITC had been availed.
  • The first respondent had itself verified and certified (Ext.P8) that the petitioner was eligible for refund, yet the second respondent failed to act on this for an extended period despite repeated correspondence.

Respondent's Arguments

  • The learned Government Pleader submitted the GST Authority had no objection to refunding the amount mistakenly paid.
  • Counsel for the second respondent submitted there had been no proper adjudication of the petitioner's refund application, though he did not dispute the first respondent's certification (Ext.P8) that the petitioner was entitled to refund.

Court Order / Findings

  • The Court held that the Authority had adopted a highly technical approach, and since the competent authority (first respondent), after verifying documents and facts, had found that the petitioner had not claimed ITC on the vehicle and was entitled to refund, the petitioner was entitled to refund of the amount paid.
  • The second respondent was directed to remit Rs.4,61,942/- along with interest at 9% per annum from 05.08.2020 (the date of the first respondent's intimation) — both principal and interest to be paid within one month.
  • The writ petition was allowed.

Important Clarification

Where a taxpayer pays a GST demand under a mistaken belief regarding ITC availment, and the assessing authority itself subsequently verifies and certifies that no such credit was in fact claimed, the refunding authority cannot withhold refund merely by citing absence of a separate formal adjudication — an unduly technical approach in the face of the department's own certification will attract not just refund of the principal but interest at 9% per annum from the date of that certification.

Sections Involved

  • Form GST DRC-01A and DRC-03, Central Goods and Services Tax Rules, 2017 – forms used respectively for intimation of liability and voluntary payment, under which the petitioner's payment was made.
  • Form GST RFD-03, Central Goods and Services Tax Rules, 2017 – the deficiency memo format issued by the refund-processing authority when a refund application is found deficient.
  • Section 54, Central Goods and Services Tax Act, 2017 (refund provisions, including interest on delayed refund) – underlying basis for the refund and 9% interest direction.

Decision – In Favour of

The writ petition was allowed, directing refund with interest — the outcome clearly favours the Assessee.

Case Details

Court: High Court of Kerala at Ernakulam
Case No.: WP(C) No. 20129 of 2020
Coram: Hon'ble Mr. Justice Dinesh Kumar Singh
Date of Order: 11.08.2023

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