2021 (1) TMI 1048 - HC - GST

Recovery of erroneous refund of IGST - Refund of the unutilized Input Tax Credit against Export of goods - Applicability of circular dated 4th September 2018, more particularly, the para 3.2 therein with retrospective effect - It is the case of the writ applicant that upon export of goods against a letter of undertaking without payment of tax, it was entitled to refund of the unutilized Input Tax Credit under Section 54(3) of the Act, 2017 - HELD THAT - Mr. Sheth, in the alternative, submitted that assuming for the moment that there is nothing wrong with the circular dated 4th September 2018, still, the show cause notice under Section 74 of the Act, could not have been issued for the purpose of taking back the refund, as such a recovery is not permissible in law. If the department is of the view that the refund was wrongly availed and sanctioned, then it should prefer an appeal and not issue a show cause notice under Section 74 of the Act. Let Notice be issued to the respondents, returnable on 2nd March 2021. Let there be an ad interim relief in terms of para 23(D) of this writ application.

Summary

Issues involved:
Challenge to show cause notice under Section 74 of the Act, 2017 based on circular dated 4th September 2018 with retrospective effect.

Analysis:
The case involves a challenge to a show cause notice issued under Section 74 of the Act, 2017 by the respondent based on a circular dated 4th September 2018. The notice seeks to recover a refund granted to the writ applicant for unutilized Input Tax Credit. The respondent contends that the applicant should have debited the IGST first instead of CGST and SGST balances. The writ applicant argues that the circular is ultra vires the GST provisions and rules. The counsel submits that the retrospective application of para 3.2 of the circular is without jurisdiction.

The counsel for the writ applicant further argues that even if the circular is valid, the issuance of the show cause notice for recovering the refund is impermissible in law. It is contended that if the department believes the refund was wrongly availed, an appeal should be preferred instead of issuing a show cause notice under Section 74 of the Act. Reference is made to a judgment of the High Court of Tripura in a similar case to support this argument.

The Court has heard the arguments presented by the counsel for the writ applicant and has issued a notice to the respondents, returnable on a specified date. Additionally, an ad-interim relief has been granted as per the terms mentioned in the writ application. The respondents are directed to be served directly through E-mail for further proceedings in the matter.