2021 (7) TMI 1115 - Commissioner - GST

Erroneous sanction of refund - export of services - SCN alleged that the period for which the refund claimed is May, 2018, whereas, the relevant payment was received only on 29-1-2019 which did not fall in the range of the relevant period - time limitation - HELD THAT - In the case on hand the appellant has exported service through invoice dated 31-5-2018. The respondent had, after sanctioning provisional refund, chosen to allege that the refund sanctioned was erroneous and consequently the same is liable for recovery along with applicable interest and penalty under Section 73(1) of CGST Act, 2017 read with Section 54 of CGST Act, 2017. This allegation levelled in the notice to Show Cause (SCN) seamlessly culminated into the impugned Order, as the appellant neither replied to the notice nor appeared for the hearing, holding that the refund was erroneously sanctioned and therefore amount refunded is liable for recovery with applicable interest and penalty. Since the claim has been admittedly filed for the period May, 2018, the relevant period in this case has to be considered as May, 2018. In this regard it is found that the respondent on the logic that since the proceeds in foreign currency for the exports made in the month of May, 2018 has been received only during January, 2019, has come to the conclusion that no proceeds in foreign currency has been received in the month of May, 2018 and therefore determined the turnover of zero rated supply of services as zero and thereby amount eligible for sanction is also zero. It is found from the SCN that the respondent has given fifteen days time for the appellant to reply to the SCN and also granted hearing on 27-1-2020. The respondent though seems to have apparently fulfilled the tenets of principles of natural justice; the fact that cannot be denied is that the impugned Order has not emerged as a culmination of a complete and robust judicial process - It is an established Law that an adverse Order seeking to impose a demand shall not be passed without considering the contra stand of the aggrieved. The respondent are directed to pass afresh a speaking Order on merits after scrupulously adhering to the principles of natural justice by giving an opportunity to the appellant - petition dismissed.

Summary

Issues involved:
1. Refund application rejection based on the timing of foreign exchange receipt.
2. Jurisdiction of the respondent to reject the refund application.
3. Interpretation of relevant provisions in determining refund eligibility.
4. Compliance with principles of natural justice in passing the impugned Order.

Detailed Analysis:
1. The appellant filed a refund application for May 2018 and received provisional refund. The respondent alleged that the refund was erroneous as the relevant payment was received in January 2019, not within the claimed period. The respondent denied the refund, stating the appellant was not eligible. The appellant argued that they received convertible foreign exchange in May 2018, supporting it with bank statements and CA certificate. The respondent's rejection was based on the date of invoice, not actual receipt, leading to the appeal against the impugned Order.

2. The appellant contended that the respondent lacked jurisdiction to reject the refund application. They argued that the rejection was against natural justice, equity, and fair play. The appellant emphasized that the respondent failed to consider their receipt of foreign exchange in May 2018, which was crucial for the refund claim. The grounds of appeal highlighted the procedural and legal flaws in the respondent's decision.

3. The dispute centered on the calculation of the turnover of zero-rated supply of services under Rule 89(4) of the CGST Act, 2017. The formula for refund amount determination includes turnover components. The appellant's eligibility hinged on the payments received during the relevant period for zero-rated services. The relevant period was crucial in assessing refund entitlement, and the appellant argued that the respondent misinterpreted this period, leading to the erroneous rejection.

4. The impugned Order was critiqued for lacking a robust judicial process and not considering the appellant's submissions adequately. Despite fulfilling the principles of natural justice on the surface, the Order did not reflect a comprehensive adjudication process. The appellant's right to reply to the Show Cause Notice and present their case was not fully acknowledged. The judgment emphasized the importance of a complete judicial process and directed the respondent to pass a fresh Order after allowing the appellant to respond and participate in the adjudication process fully.

In conclusion, the judgment highlighted the significance of adhering to legal provisions, principles of natural justice, and correct interpretation of relevant rules in determining refund eligibility. The appellant's claim for refund was upheld, emphasizing the need for a fair and thorough adjudication process in such matters.