2022 (6) TMI 553 - HC - GST

Disbursal of refund amount - Revenue and assessee both have filed writ petition - non-consideration of definition of non-taxable supply as defined in the CGST Act 2017 or not - whether the CGST authorities concerned have ignored the expression mutatis mutandis appearing in Section 2 (2) of Cess Act and have not given any justification as to why domestic supply of finished goods which are subject to nil rate of Compensation Cess cannot be construed as exempted supplies. - HELD THAT - From legislative scheme of the Cess Act it appears that the cess is an impost to counterbalance the loss of revenue of the States on account of subsumption of various taxes commencement of the GST regime. Hence cess is a levy which partakes the character of all the levies which now are subsumed in GST. Cess is akin to the components of GST which is a constitutionally approved amalgam of State taxes which existed prior to the commencement of the GST regime. The goods and services Tax Compensation Cess Rules 2017 were also framed and made effective from 1st July 2017 wherein the Central Goods and Services Tax Rules 2017 were adapted. There are no reason to interfere with the impugned order dated 5th February 2021 for the reason that Appellate authority while passing the impugned order has neither committed any procedural irregularity nor any jurisdictional error nor any violation of principles of natural justice and the impugned order is based on cogent reasons and is speaking one and so far as findings of fact is concerned in exercise of constitutional writ jurisdiction under Article 226 of the Constitution this Writ Court is not inclined to act as an Appellate authority and differ with the same and substitute the said findings of the Appellate authority. Action of withholding of the petitioner/assessee s claim of refund in question by the respondent CGST authority and not refunding the same to the petitioner in spite of the order of the Appellate authority dated 5th February 2021 holding such claim in favour of the assessee company/petitioner is arbitrary and unjustified and accordingly respondent CGST authorities concerned are directed to refund the amount as per the aforesaid order of the Appellate authority Petition disposed off.

Summary

Issues Involved:
1. Refund of ITC of Cess in cases of zero-rated supply of goods.
2. Inclusion of domestic supply in adjusted total turnover for refund calculation.
3. Jurisdictional and procedural validity of the Appellate authority's order.

Issue-wise Detailed Analysis:

1. Refund of ITC of Cess in Cases of Zero-Rated Supply of Goods:
The main issue in the writ petitions is whether for computing the refund of credit of compensation cess under Section 54(3) of the CGST Act read with Rule 89(4) of the CGST Rules, the domestic turnover of final products not taxable under the Cess Act should be excluded to arrive at the adjusted total turnover. The formula under Rule 89(4) categorically excludes the value of exempt supplies other than zero-rated supplies. The definition of "exempt supply" under Section 2(47) of the CGST Act applies mutatis mutandis to the Cess Act for computing the refund of ITC of Cess.

2. Inclusion of Domestic Supply in Adjusted Total Turnover for Refund Calculation:
The CGST authorities included the supply of finished goods not subject to Cess in the adjusted total turnover, which was contested by the assessee company. The assessee argued that this inclusion contradicts the formula prescribed in Rule 89(4) of the CGST Rules, which excludes the value of exempt supplies. The Appellate authority had allowed the refund claim by excluding such supplies from the adjusted total turnover, which was upheld by the court.

3. Jurisdictional and Procedural Validity of the Appellate Authority's Order:
The assessee company contended that the writ court should not interfere with the Appellate authority's order as there was no jurisdictional error or procedural irregularity. The court agreed, stating that the Appellate authority's order was based on cogent reasons and did not violate principles of natural justice. The court emphasized that it would not act as an appellate authority to substitute the findings of the Appellate authority.

Summary:
The court dismissed the writ petition filed by the CGST authorities, challenging the Appellate authority's order dated 5th February 2021, which allowed the refund claim of the assessee company. The court directed the CGST authorities to refund the amount as per the Appellate authority's order along with applicable interest within eight weeks. The court found no procedural irregularity, jurisdictional error, or violation of natural justice in the Appellate authority's order and upheld its findings, emphasizing that the domestic supply of goods not subject to Cess should be treated as exempt supplies for the purpose of refund calculation under Rule 89(4) of the CGST Rules.