2023 (11) TMI 774 - HC - GST

Refund of IGST - DTA unit supplying goods / services to SEZ - Inordinate delay in obtaining the endorsements - supply for authorized operation or not - Mismatch in the Statement-4, which cannot be relied on - POD was made not at the time of filing applications but at the time of filing reply/personal hearing. Inordinate delay in obtaining Endorsement - HELD THAT - A conjoint reading of Section 16 (3) of IGST Act, 2017 and Rule 30 (4) of SEZ Rules, 2006 would make it clear that the goods can be supplied to SEZ under two situations. One in terms of Section 16 (3)(a) and another in terms of Section 16 (3) (b). In terms of Section 16 (3) (a), goods can be supplied without payment of tax, upon execution of bond or letter of undertaking. In terms of Section 16 (3)(b), goods can be supplied on payment of tax. Rule 30 (4) of SEZ Rules deals with issue of endorsement by the AO to ensure that the goods have been admitted in full into the SEZ and to treat the same as proof of export. Once the endorsement is made, it would be considered that the goods have been exported. In any event, any duty has been paid in terms of Section 16 (3) (b) of the Act, the assessee would be entitled for refund. In the present case, the question of payment of tax does not arise since the petitioner has paid IGST but there was delay in obtaining the endorsement. Thus, once the assessee had paid the tax and the goods have entered SEZ and obtained endorsement to that effect and furnished the same for the purpose of refund, at any cost, refund cannot be denied for any reason whatsoever. The Officer, who is processing the refund should be concerned only about the aspect as to whether the goods have reached SEZ zone and whether tax for such entry has been remitted or not. In the present case, there is no doubt on the aspect of payment of tax by the petitioner and also entry of goods into SEZ and endorsement also obtained. The delay in obtaining the endorsement and producing the same at any cost would result only in a delay of entertaining the application for refund and in which case, the affected party would only be the petitioner and the interest of the Department not going to be affected in any way. The denial of refund claim by citing that endorsement obtained was not within 45 days and therefore, claim is barred by limitation and said findings to such effect are liable to be set aside since the failure of obtaining endorsement in time is only due to the fault of AO and the petitioner cannot be denied the claim on the ground of inordinate delay in obtaining endorsement. Inappropriate Endorsement - HELD THAT - As rightly pointed out by the learned counsel for the petitioner, as per SEZ Act or Rules, the AO is not required to make endorsement in any particular manner, since the invoices submitted by the petitioner were endorsed by AO, there is no doubt that the goods were supplied to SEZ units under Section 16 of IGST Act, and the petitioner is entitled for zero-rated tax benefit and delay in obtaining the endorsements, or mistake, if any, in such endorsements are all technical irregularity and so long as the signature is not doubted, the petitioner cannot be penalized for the actions of AO, which is beyond the control of the petitioner and by such means, deprive the petitioner's right to claim benefit under 16 (3) (b) of IGST, instead, the respondent-Department should have assisted the assesseee in rectifying the defects, rather than rejecting the petitioner's applications by citing technical reasons. Endorsement does not state that the goods supplied were for authorized operations - HELD THAT - The provisions of Section 16 of IGST Act does not contemplate that use of goods is for authorized operation and submission of such endorsement as proof and the amendment to Section 16 stipulating the rules for use of goods for authorized operations was made prospectively w.e.f. 01.10.2023 onwards only and since the petitioner made claim with regard to the supply made to SEZ unit prior to 01.10.2023, the respondent-Department cannot insist that that endorsement must state that goods supplied, were for authorized operations, and such other endorsement - this Court holds that the rejection of the petitioner's claim on the reason that the endorsement does not specifically states that the goods that have been admitted in full was for authorized operations, and it only states that the goods were received in full and that the endorsement is incomplete/insufficient/inappropriate, is not tenable. Hence, the findings rendered by the respondent-Department with regard to the denial of claim by citing the delay in obtaining endorsement, endorsement is inappropriate, etc., are set aside. Rejection of claim as barred by limitation since POD was made not at the time of filing applications but at the time of filing reply/personal hearing - HELD THAT - In the present case, admittedly, the second respondent in respect of the claim made for the month of January 2020 has issued an acknowledgment indicating that the application has no deficiencies but thereafter, issued a show cause notice in Form RFD-08 proposing to reject the claim for refund to an extent of Rs. 84,80,988, which is incorrect. If it is the case of the respondent-Department that the petitioner has filed the applications with deficiencies, the respondent-Department ought to have issued any memo pointing out such deficiency under Rule 90(3), instead the second respondent has accepted the petitioner's applications and issued acknowledgment, and therefore, it is not open to the respondent to contend that the supporting documents were filed with a delay. On a reading of the Circular issued by the Central Board of Direct Taxation, bearing CBDT No.14 of 1955 dated 11.04.1955 would make it clear that when the taxpayer made a claim for refund and if there is any discrepancies or defects in the application made for such claim, the Officer concerned should come forward to assist the assessee bearing in mind the above principles laid down by the CBDT. This Court also expects the Officer concerned to assist the assessee, whenever, the assessee intends to make a claim for refund or any other issue in line with the Circular issued by CBDT. Even in terms of Rule 90 (3), the Officer is supposed to have intimated the deficiencies contained in the application and allowed the assessee to rectify those deficiencies and thereafter, he shall proceeded to consider as to whether the claim for refund is just and proper. But, in the present case, it is seen that the respondent-Department has acted in a way, which is totally contrary to the Circulars issued by the CBDT. Had the respondent-Department intimated about the deficiencies at the point of time, when the applications were entertained by issuing any deficiency memo, obviously, the petitioner would have rectified those defects pointed out by the respondent-Department and would have made fresh application. In the present case, the application was filed within two years and therefore, the question of making claim after two years does not arise even assuming AO made endorsement after two years, the same would in no way debar the claim as barred by limitation. Further, even Rule 90 (3) of CGST Act permits to make fresh application, which means that in appropriate cases, the Officer concerned can permit the refund application even beyond the period of limitation. Therefore, there are no substance in the submission made by the learned Senior Standing Counsel for the respondent and both respondents have miserably failed to consider the said aspect while passing the impugned orders and hence, the same are liable to be set aside - in terms of notification issued by Central Tax dated 05.07.2022, vide No.13/2022, which excludes the period from 01.03.2020 to 28.02.2022 for computation of period of limitation for the purpose of filing refund application under Section 54 of the CGST Act. Thus, the petitioner's claim cannot be rejected on the ground of limitation. Mismatch of details, as the endorsement date mentioned in the invoices differs from the endorsement date mentioned in Statement-4 - HELD THAT - Though the respondent-Department pointed out that the date of endorsement in the invoices is different from the date of endorsement mentioned in Statement-4, in respect of the claim for refund made for the month of December 2019, since said defect was rectified by the petitioner at the time of filing of reply on 28.01.2022 and the petitioner also furnished revised Statement-4, and the same is also accepted by the learned Senior Standing Counsel for the respondent-Department, findings rendered by the respondent-Department on the ground of mismatch are also liable to be eschewed. This Court is of the view that both the first and second respondent have committed a serious flaw in the decision making process and therefore, the impugned orders have to be held to be unsustainable - Petition allowed.

Summary

Issues Involved:
1. Inordinate delay in obtaining endorsement, inappropriate endorsement, and endorsement not stating that goods supplied were for authorized operations.
2. Rejection of applications on the ground of alleged delay in submitting supporting documents.
3. Mismatch of details in the endorsement dates mentioned in invoices and Statement-4.

Summary:

Issue 1: Inordinate Delay in Obtaining Endorsement, Inappropriate Endorsement, and Endorsement Not Stating Goods Were for Authorized Operations:

The petitioner argued that Rule 30(4) of SEZ Rules, 2006, which mandates obtaining endorsement within 45 days from the date of invoice, does not apply to their case as they supplied goods to SEZ units on payment of tax under Section 16(3)(b) of the IGST Act. The court held that once the petitioner has paid IGST and the goods have entered SEZ with endorsement obtained, refund cannot be denied for delay in obtaining endorsements. Moreover, the court noted that the significance of the endorsement is to ensure goods have reached SEZ and tax has been paid. The delay in obtaining the endorsement is not the petitioner's fault but that of the Authorized Officer (AO). The court also noted that the provisions of Section 16 of the IGST Act do not require the endorsement to state that goods are for authorized operations, and this requirement was introduced only prospectively from 01.10.2023. Therefore, the rejection of the refund claim on these grounds was not tenable and was set aside.

Issue 2: Rejection of Applications on the Ground of Alleged Delay in Submitting Supporting Documents:

The petitioner submitted that Section 54 of the CGST Act prescribes a two-year time limit for filing refund applications, and Rule 90(2) and (3) of CGST Rules require the proper officer to scrutinize the application within 15 days and issue a deficiency memo if documents are missing. The court noted that the petitioner filed the applications within the prescribed time limit and that the respondent-Department issued acknowledgments without pointing out deficiencies. The court held that non-submission of documents at the time of filing the application cannot be deemed a delay, and the delay in obtaining endorsements due to Covid-19 was beyond the petitioner's control. The court also referred to a notification excluding the period from 01.03.2020 to 28.02.2022 for computing the period of limitation for filing refund applications. Therefore, the rejection of the refund claim on the ground of limitation was set aside.

Issue 3: Mismatch of Details:

The petitioner rectified the mismatch in endorsement dates in the invoices and Statement-4 at the time of filing the reply. The court noted that the respondent-Department accepted the rectified Statement-4. Therefore, the rejection of the refund claim on the ground of mismatch was not sustainable and was set aside.

Conclusion:

The court found that the respondents committed serious flaws in the decision-making process. Consequently, the impugned orders were set aside, and the second respondent was directed to process the petitioner's refund applications and issue the refund within 30 days. The matter was posted for filing a compliance report on 18.12.2023.