Facts of the Case

  • The petitioner exported goods under zero-rated supply without payment of IGST under LUT and claimed refund of ITC.
  • Refund applications were filed for July and August 2019.
  • Deficiencies for July 2019 were rectified and acknowledged by the department.
  • Refund application for August 2019 was filed, and later re-filed due to portal issues.
  • The department withheld refund citing investigation by DGGI, Ahmedabad regarding alleged fraudulent ITC.
  • A personal hearing notice under Section 54(11) CGST Act was issued.

Issues Involved

  1. Whether refund of ITC on zero-rated exports can be withheld due to pending investigation.
  2. Whether the statutory timeline under Sections 54 & 56 CGST Act must be strictly followed.
  3. Whether administrative delay or investigation justifies non-processing of refund claims.

Petitioner’s Arguments

  • Goods were exported as zero-rated supplies, entitling refund of ITC.
  • All deficiencies had been rectified and acknowledged.
  • Refund provisions under Sections 54 & 56 CGST Act and Rules 90 & 91 provide a complete mechanism with strict timelines.
  • Relied on precedent: Jian International vs Commissioner of Delhi GST.

Respondent’s Arguments

  • Refund was withheld due to ongoing investigation by DGGI for alleged fraudulent ITC.
  • The case was still under investigation, justifying withholding of refund.
  • Personal hearing was scheduled under Section 54(11) CGST Act.

Court Findings / Order

  • The petitioner chose to withdraw the writ petition in light of subsequent developments.
  • Liberty was granted to challenge the two letters dated 10 November 2020.
  • The writ petition was accordingly disposed of with liberty. 

Important Clarification

  • The Court did not adjudicate on merits regarding refund entitlement.
  • The order clarifies that taxpayers retain the right to challenge administrative actions like withholding of refund under Section 54(11).
  • Highlights procedural importance of departmental communication and investigation-based withholding.

Link to download the order -  https://delhihighcourt.nic.in/app/case_number_pdf/2020:DHC:3240-DB/MMH11112020CW88442020_171000.pdf 

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