2020 (12) TMI 939 - HC - GST

Refund of excess cash deposited - Balance in Electronic Cash ledger - It is the case of the petitioner that a considerable quantity of the sales effected by it is to SUPPLYCO and FACT, who deduct tax at the rate of 2% on payments made to the petitioner in terms of Section 51 of the GST Act - HELD THAT - From a perusal of Ext.P4 order that is impugned in the writ petition that the 2nd respondent has completely misunderstood the nature of the claim made by the petitioner as also the scope and ambit of Sections 51 and 54 of the CGST Act. In the instant case, as is evident from the facts stated in the writ petition as also from a perusal of the claim for refund preferred by the 2nd respondent, what the petitioner was essentially claiming was the refund of the balance remaining in the Electronic Cash Ledger, that was maintained in accordance with the provisions of the Act. Section 54(1) deals with claims for refund of any tax and interest or other amount paid by the assessee, and the proviso to Section 54(1) deals with claim for refund of any balance in the Electronic Cash Ledger. In the instant case, it is not in dispute that during the period for which the refund was claimed by the petitioner assessee, there was no outstanding liability towards tax, interest, penalty or any other amount under the Act, and there were excess amounts in the Electronic Cash Ledger of the petitioner-assessee that could be considered for refund to him in terms of the first Proviso to Section 54 of the Act. The 2nd respondent, however, misdirected himself and treated the claim for refund preferred by the petitioner as one relating to Section 51(8) of the Act. It has to be noted that at no stage did the petitioner have a case that the deduction of tax at source by SUPPLYCO/FACT was excessive or erroneous. That being the case, there was no occasion for the 2nd respondent to have considered the application as one traceable to Section 51(8) of the Act. The only exercise that had to be done by the 2nd respondent was to ascertain whether there was a balance in the Electronic Cash Ledger, after meeting the known liabilities of the petitioner towards tax, interest or any other amount under the Act, and if there was such a balance, the refund had necessarily to be granted to the petitioner. Ext.P4 order of the 2nd respondent cannot be legally sustained - the 2nd respondent is directed to ascertain the excess amount lying to the credit of the petitioner in his Electronic Cash Ledger after making provision for any known and determined liability of the petitioner towards tax, interest, penalty or other amounts under the Act - Petition allowed.

Summary

Issues:
1. Interpretation of Sections 51 and 54 of the CGST Act regarding refund claims.
2. Misunderstanding by the 2nd respondent in rejecting the refund claim.
3. Legal validity of Ext.P4 order and direction for refund.

Analysis:
1. The petitioner, a partnership firm manufacturing coconut oil, claimed a refund of the excess amount in its Electronic Cash Ledger, resulting from tax deductions by SUPPLYCO and FACT. The petitioner argued that there was no known liability towards tax, penalty, or interest, justifying the refund claim under Section 54 of the CGST Act. The court found that the 2nd respondent misunderstood the nature of the claim and misapplied Sections 51 and 54. It clarified that the refund pertained to the balance in the Electronic Cash Ledger, allowable under Section 54(1) proviso, after meeting liabilities. The petitioner's claim was not related to excess or erroneous deductions under Section 51(8), as wrongly assumed by the 2nd respondent.

2. The court emphasized that the 2nd respondent erred in not recognizing the petitioner's entitlement to a refund based on the balance in the Electronic Cash Ledger. The judge highlighted that the refund claim was legitimate as there were excess amounts in the ledger without any outstanding liabilities. The 2nd respondent's failure to differentiate between deductions under Section 51 and refund claims under Section 54 led to the erroneous rejection of the petitioner's application. The court concluded that the 2nd respondent's decision was legally unsustainable and directed the refund of the excess amount within three weeks.

3. In the judgment, the court quashed the Ext.P4 order of the 2nd respondent and instructed a reassessment of the excess amount in the petitioner's Electronic Cash Ledger. The court clarified that the refund should be processed after accounting for any known liabilities of the petitioner under the Act. By providing a clear interpretation of the provisions of the CGST Act, the court ensured that the petitioner's rightful claim for a refund based on the Electronic Cash Ledger balance was upheld, emphasizing the correct application of Sections 51 and 54 in such cases.