Facts of the Case

The petitioner, Saurabh Aggarwal, proprietor of M/s Aarav Plastics, filed a refund application dated 30.03.2022 claiming ₹2,42,846/- towards unutilised Input Tax Credit (ITC) arising due to an inverted duty structure.

A show cause notice dated 25.05.2022 was issued proposing rejection on two grounds:

  1. Mismatch in reported turnover for April 2021 to September 2021.
  2. The ITC claimed pertained to goods under HSN 6404 (ready footwear), which were also outward supplies, thereby allegedly negating the existence of an inverted duty structure.

The petitioner responded with supporting documents; however, the refund claim was rejected on 31.05.2022 citing non-submission of requisite documents.

The appellate authority further rejected the appeal on the ground that statutory records (GSTR-1, GSTR-3B, GSTR-2A) were not submitted, and the claim could not be correlated.

Issues Involved

  1. Whether refund of unutilised ITC can be denied without specifically calling for required documents.
  2. Whether rejection of refund claim on procedural grounds, despite availability of records on the GST portal, is justified.
  3. Whether principles of natural justice were violated by not providing an adequate opportunity to the petitioner.

Petitioner’s Arguments

  • The petitioner submitted that all required documents were already provided, including a soft copy attached in PDF format.
  • It was argued that statutory returns were available on the GST portal with the authorities.
  • The petitioner contended that rejection without proper verification and without seeking clarification was arbitrary and unjustified.

Respondent’s Arguments

  • The department argued that the petitioner failed to submit necessary statutory records such as GSTR-1, GSTR-3B, and GSTR-2A.
  • It was contended that in absence of these documents, the refund claim could not be verified or correlated.

Court’s Findings

  • The Court noted that it was undisputed that the petitioner was not specifically asked to furnish the statutory documents relied upon for rejection.
  • The Court observed that the statutory records were available with the department on the GST portal, which could have been accessed.
  • The rejection of the claim without providing an opportunity to submit documents was found procedurally improper.

Court Order

  • The matter was remanded back to the appellate authority for fresh consideration.
  • Directions issued:
    • The appellate authority shall issue a proper notice specifying required documents.
    • The petitioner shall submit all necessary documents, including statutory returns, within two weeks.
    • The appellate authority shall decide the matter afresh within six weeks. 

Important Clarification

  • Authorities must explicitly call for required documents before rejecting refund claims.
  • Availability of documents on the GST portal cannot be ignored.
  • Procedural lapses should not defeat substantive rights.
  • Reinforces principles of natural justice in GST adjudication.

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/VIB04102023CW114532023_173415.pdf

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