2023 (12) TMI 662 - HC - GST

Refund of the Input Tax Credit (ITC) - primary ground of challenge as urged on behalf of the petitioner is that the Appellate Authority has erroneously proceeded to apply Circular dated 18 November 2019, which provides that the refund claim filed could not be spread across different financial years - HELD THAT - There are much substance in the contentions as urged on behalf of the petitioner. It appears to be an admitted position that the petitioner had filed refund application under Section 54 (3) of the CGST Act for the relevant period which is defined under Rule 89(4) of the CGST Rules. In the statutory pattern, the electronic ledger is required to be maintained, it was permissible for the petitioner to club the ITC credit available to the petitioner for the prior period. As the credit which was available for the period prior to 1 April 2018 pertained to the financial year 2017-18 the same was certainly available to the petitioner in its electronic ledger in the form of a running account - from the reading of the impugned order, it appears to be quite clear that such aspect of the matter has been overlooked and / or not addressed in so far as to what has been clarified by the department itself, so as to bring the interpretation as held by Circular dated 31 March 2020 to be in consonance with what has been provided by Rule 89(4) of the CGST Rules. It was neither permissible for the Appellate Authority to overlook the Rule as it stands nor disregard the Circular dated 31 March 2020. The appellate authority ought to have recorded a finding on such issue. The order passed by the Appellate Authority cannot be sustained and would be required to be set aside - Petition allowed.

Summary

Issues involved:
The judgment involves a challenge to an Order-in-Appeal passed by the Commissioner of CGST & Central Excise Appeals regarding the refund of Input Tax Credit (ITC) on export of goods under Letter of Undertaking (LOU). The primary issue revolves around the application of Circulars dated 18 November 2019 and 31 March 2020 in relation to the refund claim filed by the petitioner.

Summary of Judgment:

Issue 1: Refund Application and Appellate Authority's Decision
The petitioner applied for refund of unutilized ITC under Section 54(3) of the CGST Act, 2017. The Deputy Commissioner initially granted a provisional refund, followed by a final refund order. However, the department challenged the initial order in an appeal, leading to the Appellate Authority directing the petitioner to repay a portion of the refund along with interest. The petitioner contested the legality of this decision before the High Court.

Issue 2: Application of Circulars and Compliance with Rules
The petitioner argued that the Appellate Authority erred in applying Circular dated 18 November 2019, which restricted the spreading of refund claims across different financial years. The petitioner contended that their refund application was compliant with Rule 89(4) of the CGST Rules, covering the relevant period from April 2018 to July 2019. The petitioner highlighted the subsequent Circular dated 31 March 2020 as a clarification of the earlier circular, supporting their position.

Court's Decision and Analysis
After examining the contentions of both parties, the Court found merit in the petitioner's arguments. It noted that the petitioner's refund application was in line with Rule 89(4) and the subsequent Circular dated 31 March 2020, allowing for the clubbing of ITC credits across periods. The Court criticized the Appellate Authority for overlooking the rules and subsequent clarifications, leading to an erroneous decision. Consequently, the Court set aside the Appellate Authority's order and remanded the appeal for fresh consideration, emphasizing the importance of adhering to the relevant rules and circulars.

In conclusion, the Court quashed the impugned order, restored the appeal to the Appellate Authority for reconsideration, and directed the department not to take coercive action until a new decision is reached. The Court emphasized the need for expeditious resolution of the appeal within a specified timeframe, keeping all contentions open for further consideration. The judgment was delivered without any costs imposed on either party.