2021 (10) TMI 630 - HC - GST

SEZ unit - Refund of unutilized Input Tax Credit - entity to seek a refund - Rejection of the request of the SEZ/petitioner for refund of taxes paid under the Central Goods and Services Tax Act, 2017 - taxes were paid erroneously - zero rated supply - rejection on the ground that applications were deficient in some respects and deficiency memo - quantification of the amount of refund - HELD THAT - The statutory scheme for refund under the CGST and SGST Acts, permits any entity to seek a refund of taxes or other amounts paid under the provisions of the Act, subject to satisfaction that is it so entitled, and that there is no double claim as against the same amount. Ordinarily, though zero rated supplies are not subject to the levy of taxes, the petitioner, in this case has remitted the same as raised in the invoice, albeit erroneously - the provisions of Section 54 of the CGST Act, providing for a refund, apply to any person who claims such refund and who makes an application for the grant of the same. The language of the provision is clear and does not contain, or admit of any restriction in its operation. On a combined reading of Section 54 and Rule 89, the restriction which has been read into the provision by the Revenue is, in my view, misplaced. In fact, the Officer in the impugned order proceeds on the basis that the second proviso to Rule 89 deploys the word 'only', which is not found in the second proviso. It is a settled position that there can be no insertion of a word or phrase in a statutory provision or in a Rule which must be read and applied, as framed. No restrictions or amplifications of the Rule are permissible by interpretation. Quantification of the refund - HELD THAT - This is a matter of fact which the petitioner will have to establish before the respondent. This aspect of the matter finds reference in Section 54(4), extracted earlier in this order, which provides for the refund application to be comprehensive and accompanied by all relevant documentary evidence in support of the claim. The petitioner will appear before the 2nd respondent on a date to be fixed by the authority and provide all material available with it in support of its claim - petition disposed off.

Summary

Issues Involved:

1. Eligibility of SEZ to claim refund of taxes under CGST, SGST, and IGST Acts.
2. Interpretation of Section 54 of the CGST Act and Rule 89 of the CGST Rules.
3. Quantification and verification of refund claims.

Detailed Analysis:

1. Eligibility of SEZ to Claim Refund of Taxes:

The petitioner, a Special Economic Zone (SEZ), sought refunds for taxes paid under the CGST, SGST, and IGST Acts. The supplies to the SEZ were zero-rated, meaning the SEZ was not liable for these taxes. However, the suppliers erroneously included SGST and CGST in the invoices, which the SEZ paid. The petitioner applied for refunds, which were initially deficient but later corrected and taken on file. The respondents issued a show cause notice questioning the SEZ's locus to claim the refund, arguing that only suppliers could claim refunds as per Section 54 of the CGST Rules.

2. Interpretation of Section 54 of the CGST Act and Rule 89 of the CGST Rules:

The core issue was whether a SEZ unit could claim a refund of unutilized Input Tax Credit (ITC). The respondents argued that only suppliers could claim refunds, citing Rule 89 of the CGST Rules, which specifies that applications for refunds should be filed by suppliers. The petitioner contended that Section 54 of the CGST Act allows "any person" to claim a refund, which should include SEZs. The petitioner referred to Clause (g) of the Explanation under Section 54, which indicates that entities other than suppliers can file for refunds, thus supporting their claim.

3. Quantification and Verification of Refund Claims:

The court examined the statutory scheme under the CGST and SGST Acts, which permits any entity to seek a refund of taxes or other amounts paid, provided there is no double claim. The court noted that the language of Section 54 is clear and inclusive, allowing any person to claim a refund. The court disagreed with the respondents' interpretation that only suppliers could claim refunds, emphasizing that Rule 89(1) does not restrict applications to suppliers alone. The court held that the petitioner SEZ is entitled to claim the refund.

Conclusion:

The court ruled in favor of the petitioner on the legal issue of entitlement to a refund. However, the court acknowledged the revenue's legitimate concerns about ensuring no double claims and verifying that the taxes paid by the supplier were remitted to the treasury. The petitioner was directed to provide all necessary documentation to the respondent to substantiate their claim. The court granted the respondent full liberty to seek additional information to address any apprehensions.

Disposition:

The writ petitions were disposed of with directions for the petitioner to appear before the respondent and provide all relevant material to support their claim. The court closed connected miscellaneous petitions and did not award costs.