2019 (7) TMI 1383 - HC - GST

Refund of unutilized CENVAT Credit - transitional credit - registered person - mandate of Section 54(3) of the CGST Act, 2017 - HELD THAT - Prima facie, it appears that the Commissioner has overlooked the issue with regard to Transitional Cenvat Credit of ₹ 79,89,56,035/- which was availed upto 30.06.2017 and was transferred as CGST. Let Notice be issued to the respondents returnable on 16th October, 2019.

Summary

Issues:
1. Interpretation of Section 54(3) of the CGST Act, 2017 regarding refund of unutilized input tax credit.
2. Validity of refund granted when there was no balance of unutilized ITC credit.
3. Claiming refund based on auto-populated amounts in GST portal.
4. Transfer of Transitional Cenvat Credit as CGST and its relevance to refund.

Analysis:
1. The Commissioner, Central GST, Ahmedabad, in the impugned order, emphasized that Section 54(3) of the CGST Act, 2017 allows a registered person to claim a refund of any unutilized input tax credit at the end of any tax period. The Commissioner stated that the refund can be sanctioned purely based on this mandate, regardless of the balance of unutilized ITC credit at the time of refund application.

2. The Commissioner found the argument that no balance of unutilized ITC credit existed at the time of refund, as raised by the department, to be legally incorrect. The Commissioner noted that even if the amounts were auto-populated by the system in the GST portal, any refund not legally permitted cannot be granted, especially when there was no unutilized ITC lying in the balance for the refunds erroneously granted.

3. The writ applicant responded to a query regarding unutilized input tax credit after the refund order by explaining the transfer of Transitional Cenvat Credit as CGST. The applicant clarified that the credit amount credited on a specific date pertained to the opening balance of CGST as of a previous date, highlighting the importance of understanding the nature and origin of the credit amount in question.

4. It was observed that the Commissioner may have overlooked the issue concerning the Transitional Cenvat Credit of a significant amount that was availed and transferred as CGST. This oversight raised questions about the proper consideration of all relevant factors and credits before granting or disputing a refund claim.

5. Consequently, the High Court issued a notice to the respondents, returnable on a specified date, to address the issues raised in the matter. Additionally, the Court ordered no coercive recovery towards the refund amount during the interim period, ensuring a fair and just process for all parties involved in the dispute.

6. The judgment highlighted the importance of adherence to legal provisions, proper documentation, and accurate interpretation of credit transfers and refund claims under the GST regime. It underscored the need for thorough scrutiny and consideration of all relevant factors before granting or disputing refund claims to maintain the integrity and legality of the tax system.