2020 (10) TMI 110 - HC - GST

Principles of Unjust Enrichment - Amount refunded to consumer welfare fund instead of the petitioner - inverted duty structure - HELD THAT - Since in the present case quashing of the Circular dated 18th November, 2019 is not sought but only an interpretation has been placed upon it and reliance on Jian International (supra) can be placed before the respondents, this Court directs the petitioner to take all its pleas in the replies to the show cause notice, deficiency memo and representation seeking credit of refund in his account. The present writ petition and pending application stand disposed of with the aforesaid directions. Though it is clarified that all the rights and contentions of parties are left open, yet it is directed that the replies and representations filed by the petitioner shall not be rejected/dismissed on the ground of limitation.

Summary

Issues Involved:
Challenge to deficiency memo, show cause notice, and refund sanction order; compliance with Circular no. 125/44/2019-GST; delay in issuing deficiency memo; interpretation of Section 54(8) of CGST Act, 2017.

Detailed Analysis:

1. The petitioner challenged the deficiency memo issued by respondent no. 4 for the period July 2018 to September 2018, the show cause notice issued by respondent no. 3 for the period October 2018 to December 2018, and the refund sanction order issued by respondent no. 3 for the period January 2019 to March 2019. The petitioner sought directions for the refund of Input Tax Credit for all three periods along with interest.

2. The petitioner's counsel argued that the respondents were asking for documents to be furnished again despite having them on record. He contended that the reasons for inadmissibility of refund were not clearly recorded, and there was no need for the petitioner to appear in person when clarifications could be provided electronically.

3. The counsel submitted that the deficiency memo and show cause notice were invalid as they were based on Circular no. 125/44/2019-GST, which cannot impose additional compliance requirements beyond the Act and Rules. He pointed out that the deficiency memo was issued after a delay of around 90 days, contrary to the mandatory 15-day period under Rule 90.

4. Referring to Section 54(8) of the CGST Act, the counsel argued that when a refund is claimed due to an inverted duty structure, the refundable amount should be paid to the applicant and not credited to the consumer welfare fund. He cited a previous judgment to support his interpretation.

5. The Court issued notice to the respondents, who accepted it. The Court directed the petitioner to include all arguments in responses to the show cause notice, deficiency memo, and representation, emphasizing that the Circular was not being challenged but interpreted.

6. Respondent's counsel assured expeditious decision-making on the replies and representations, with an opportunity for the petitioner's representative to be heard. The petitioner was not required to appear in person. The Court accepted this statement and held the respondents bound by it.

7. The Court disposed of the petition with directions for prompt decision-making on the pending matters, ensuring that replies and representations would not be rejected based on limitation grounds. The order was to be uploaded on the website and shared with the counsel via email.