2020 (11) TMI 785 - HC - GST

Refund of GST - Refund was rejected on the ground that there is no provision under GST Act and GST Rules for refund of excess payment of tax, if such payment is made through ITC - HELD THAT - The Appellate Authority cannot be faulted for undertaking an enquiry even after observing that the order of the Adjudicating Authority was erroneous because the Appellate Authority has to decide whether the petitioner has made out a case for grant of refund. The Adjudicating Authority had only scrutinized the cash ledger in GST portal for the relevant period of refund. In the reply to the SCN, the petitioner had stated that the GST liability for the month of August, 2017 had been discharged by debiting from ITC credit ledger to the extent of its availability and the balance liability was paid from cash ledger for the month and that since there is no requirement of debiting invoice-wise liability from the said ledger, the same may not be visible on the portal. The Appellate Authority concluded that the petitioner had rectified their error in tax payment in GSTR-3B for the month of August, 2017 in the GSTR-1 of the respective month, and the excess payment of tax had been carried forward to the next month s return to be offset against the output tax liability for that month. However, it does not appear from the order of the Appellate Authority that the Appellate Authority had perused and examined GSTR-1, GSTR-2 and GSTR-3B for the month of September, 2017 to actually find out whether excess payment of tax had been carried forward to be offset against the output tax liability of that month. It was presumed by the Appellate Authority that the petitioner had rectified the error in the GSTR-1 for the month of August, 2017 and that the excess payment of tax had been carried forward in the return of September, 2017. On that presumption, it was held that excess payment of tax in GSTR-3B is not actually an excess payment of tax as it will be auto adjusted by the system and therefore, there is no requirement of refund. No finding has been recorded that, subsequently, excess payment of tax had been auto adjusted. It is the positive case of the petitioner that excess payment of tax had not been carried forward to the subsequent months. The Appellate Authority, in the context of a claim for refund for excess payment of tax, may be justified to look into contemporaneous materials, but in such a circumstance, it will be imperative and mandatory for the Appellate Authority to afford an opportunity to the petitioner (appellant) to furnish its comments on the aspects on which the Appellate Authority would like to examine the matter by way of further enquiry. The Appellate Authority, in the instance case, was required to grant the petitioner an opportunity to explain its stand on GSTR-1 and GSTR-3B as also the Circulars - the impugned order militates against the principles of natural justice. Petition allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Incorrect issuance of invoices and subsequent GST payment.
2. Rejection of refund claim by the Adjudicating Authority.
3. Appeal against the rejection of the refund claim.
4. Examination of excess tax payment and its adjustment.
5. Principles of natural justice in the appellate process.

Detailed Analysis:

1. Incorrect Issuance of Invoices and Subsequent GST Payment:
The petitioner, a Private Limited Company, inadvertently issued two invoices for the transfer of goods between its two units in August 2017, which should have been covered by a delivery challan as per Section 7 of the CGST Act. Consequently, the petitioner did not declare these transfers as "outward supply" in the GSTR-01 for August 2017 but mistakenly included them in the GSTR-3B return, resulting in an excess GST payment of ?15,84,598.

2. Rejection of Refund Claim by the Adjudicating Authority:
The petitioner filed for a refund of the excess GST paid under Section 54 of the CGST Act. However, the Adjudicating Authority rejected the claim, stating that there was no provision under the GST Act and Rules for refund of excess tax paid through ITC. This decision was communicated in an order dated 01.04.2019/02.04.2019.

3. Appeal Against the Rejection of the Refund Claim:
The petitioner appealed to the Commissioner (Appeals), who found the Adjudicating Authority's ground for rejection erroneous but still denied the refund, concluding that no actual excess payment of tax had occurred. The petitioner then approached the High Court due to the absence of a Goods and Services Tax Appellate Tribunal.

4. Examination of Excess Tax Payment and Its Adjustment:
The Appellate Authority held that the petitioner had rectified the error in GSTR-1 for August 2017, carrying forward the excess tax to offset against the output tax liability of the subsequent month. However, the High Court noted that this conclusion was based on presumption rather than actual examination of GSTR-1, GSTR-2, and GSTR-3B for September 2017. The Court found that the Appellate Authority did not verify whether the excess tax was indeed carried forward and adjusted.

5. Principles of Natural Justice in the Appellate Process:
The High Court emphasized that the Appellate Authority should have given the petitioner an opportunity to comment on the aspects it intended to examine further. The Court found that the Appellate Authority's inquiry, conducted without affording such an opportunity, violated the principles of natural justice.

Conclusion:
The High Court set aside the Appellate Authority's order dated 11.09.2019, directing the petitioner to file a representation addressing the issues identified in the Appellate Authority's order. The Appellate Authority was instructed to grant a hearing to the petitioner and pass a fresh order expeditiously. The writ petition was allowed with these directions and observations.