2020 (9) TMI 779 - HC - GST

Constitutional Validity of Rule 90(3) of the CGST Rules - Refund the excess tax - HELD THAT - Issue notice. List on 09th December, 2020. The order be uploaded on the website forthwith.

Summary

Issues:
Challenging the Second Deficiency Memo under Rule 90(3) of the CGST Rules for the Financial Year 2019-2020 and seeking refund of excess tax paid, declaration of ultra vires of Rule 90(3) of the CGST Rules, and deprivation of right to claim interest on refund.

Analysis:
The petition challenges the Second Deficiency Memo dated 23rd July, 2020, issued under Rule 90(3) of the CGST Rules for the Financial Year 2019-2020. The petitioner seeks directions for refunding the excess tax of ?1,05,39,480 inadvertently paid, along with applicable interest from 17th February, 2020. Additionally, the petitioner requests a declaration that Rule 90(3) of the CGST Rules is ultra vires Articles 14 and 19(1)(g) of the Constitution of India. Alternatively, the petitioner asks for Rule 90(3) to be interpreted such that rectification of deficiencies does not constitute a fresh application for refund, affecting the computation of limitation for applying for a refund and the grant of interest on delayed refunds under the Central Goods and Services Tax Act, 2017.

The petitioner argues that the refund procedure outlined in Rule 90(3) of the CGST Rules is arbitrary, illegal, and ultra vires because a deficiency memo effectively rejects the refund application without providing an opportunity for a hearing. It is contended that a refund application under Section 54 of the CGST Act, read with Rule 89 and Rule 90(3) of the CGST Rules, is automatically considered rejected, treating any subsequent refund applications as fresh applications. Consequently, interest is calculated only from the date of the second or subsequent refund applications filed after receiving deficiency memos. The petitioner asserts that this process deprives applicants of their right to claim interest on refunds from the date of the initial application.

The Court has issued notice to the respondents, who have been given four weeks to file their counter-affidavits. The next hearing is scheduled for 09th December, 2020. The order has been directed to be uploaded on the website immediately, and a copy will be forwarded to the learned counsel via e-mail.