2022 (5) TMI 183 - HC - GST

Withholding to release refund/reimbursement of additional GST tax liability to the Petitioners - contracts entered into prior to the GST regime - HELD THAT - It is unfortunate to note that the respondents have not been able to understand the basic scheme of the GST Act. The input tax credit is admissible under Section 16(1) of the GST Act of the tax paid on goods and services used in the course of the business. The input tax credit claimed by a taxable person gets credited into his electronic credit ledger. Such amount is the actual tax that such taxable person has paid to his supplier which is further paid to the Government treasury. Thereafter while making the payment of the output tax Section 49 of the GST Act entitles a taxable person to utilize the balance available in the electronic credit ledger. Thus the tax which was already paid by a taxable person is effectively allowed to be set off against the output tax liability. Therefore the tax payment through the electronic credit ledger is a legally recognized mode of payment under the GST Act. In fact it is settled legal position that the input tax credit is as good as tax paid by the assessee. Thus the payment of tax by utilization of the tax credit is a valid mode of payment. The denial to release refund/ reimbursement on the ground that only part amount has been paid by the writ-applicants through the electronic cash ledger is not legally tenable - It may not be out of place to state that the fact that the output tax even in respect of this contract has been paid through the electronic credit ledger does not mean that the input tax credit is claimed in respect of this contract. There is a difference between availment of the input tax credit and the utilization of the input tax credit. Insofar as the passing of the benefit of the input tax credit is concerned the input tax credit factually availed qua the contract is to be calculated. This is clear from the terms of the order of the Ministry of Railways as well as the JPO. However insofar as the utilization of the input tax credit from the electronic credit ledger is concerned the same is only a mode of payment of the output tax. The impugned communication refusing to release the refund/reimbursement of the GST is hereby quashed and set-aside. The respondents are directed to forthwith release the refund in respect of which the pay order has already been generated - Application allowed.

Summary

Issues Involved:
1. Whether the respondents are justified in withholding the GST refund/reimbursement in favor of the writ-applicants.
2. Validity of the respondents' insistence on details of other contracts for input tax credit verification.
3. Legality of the respondents' stance on tax payment through electronic cash ledger versus electronic credit ledger.

Issue-wise Detailed Analysis:

1. Withholding of GST Refund/Reimbursement:
The primary issue for consideration is whether the respondents are justified in withholding the refund/reimbursement of GST to the writ-applicants. The Government of India, through the Ministry of Railways, issued an order on 27.10.2017 for GST neutralization of contracts awarded before the implementation of GST. Pursuant to this, the Western Railways issued a Joint Procedure Order (JPO) on 21.1.2018, detailing the procedure for GST neutralization. The JPO mandates a case-by-case review for GST neutrality and requires a supplementary agreement for each contract. The writ-applicants entered into such an agreement for the contract dated 29.6.2017. The Chartered Accountant certified no GST-paid inputs were used, entitling the writ-applicants to a refund. The respondents, however, withheld the refund, claiming a lower amount of tax was paid through the electronic cash ledger.

2. Insistence on Details of Other Contracts:
The respondents insisted on details of other contracts to verify the input tax credit, which the writ-applicants argued was unwarranted. The JPO specifies that GST neutralization should be calculated separately for each contract, and the supplementary agreement is to be entered into for each individual contract. The Chartered Accountant's certificate confirmed no GST-paid inputs were used in the specific contract in question. The respondents' demand for details of other contracts was beyond the requirements of the JPO and practically impossible, as input tax credit forms a homogeneous pool once credited to the electronic credit ledger.

3. Legality of Tax Payment through Electronic Ledgers:
The respondents' refusal to grant a refund based on the mode of tax payment (electronic cash ledger vs. electronic credit ledger) is legally untenable. Under the GST Act, input tax credit is admissible for tax paid on goods and services used in business and gets credited to the electronic credit ledger. This credit is as good as tax paid and can be utilized for output tax liability. The Supreme Court in Jayaswal Neco Ltd. affirmed that input tax credit is equivalent to tax paid. Therefore, the respondents' stance that only part of the tax paid through the electronic cash ledger is valid for refund is incorrect. The refund should be released irrespective of whether the tax was paid through the electronic cash ledger or credit ledger.

Conclusion:
The court concluded that the respondents' withholding of the refund was unjustified and contrary to the Ministry of Railways' order, the JPO, and the supplementary agreement. The respondents' insistence on details of other contracts and their stance on the mode of tax payment were both legally flawed. The court directed the respondents to release the refund of Rs. 1,23,02,620 to the writ-applicants within four weeks. The impugned communication dated 13.5.2019 was quashed and set aside.