2022 (11) TMI 484 - HC - GST

Refund of Input Tax Credit - tax on the export of eggs - nil rated commodity - petitioner had instead of opting for exports without payment of tax, had opted for the column with payment of tax - HELD THAT - An order of rejection came to be passed by the officer wherein the petitioner's response with regard to the quantum of ITC appears to have been accepted though he does not say so in as many words. In conclusion, he reiterates the objection raised by him in regard to the categorization of the services pointing out that the petitioner's entitlement fails since it was made only under the residuary category. This is the sole ground upon which the claim has been rejected. A counter has been filed by the respondent. Nowhere in the counter nor in the course of the oral arguments, does Ms.Lydia, learned standing counsel dispute the entitlement of the petitioner to the refund. In fact, she would fairly accede to the position that the error is bonafide and reiterate that the petitioner is, in fact, entitled to the refund of ITC seeing as the export was not liable to tax. The officer shall issue the refund within a period of eight (8) weeks from today after satisfying himself in regard to the quantum of refund as on the date of refund of application - Petition allowed.

Summary

Issues:
1. Entitlement to Input Tax Credit (ITC) on export of eggs.
2. Discrepancy in ITC claimed and available in Electronic Credit Ledger.
3. Rejection of refund application based on categorization of services.
4. Review of officer's decision on refund entitlement.

Analysis:
1. The petitioner, a sole proprietary engaged in egg exports, claimed entitlement to Input Tax Credit (ITC) accumulated on exports due to the commodity being 'nil' rated for taxation. The period in question was from 01.08.2017 to 31.03.2018, with a return filed in May 2018 under form GSTR-3B.

2. A discrepancy arose as the petitioner mistakenly opted for 'with payment of tax' instead of 'without payment of tax' for exports in the return. The ITC available in the Electronic Credit Ledger (ECL) was claimed to have increased from Rs.7,04,851 to Rs.11,63,200 by the petitioner without providing documentary evidence.

3. The officer issued a notice of deficiency pointing out the error in the refund application, emphasizing the need for specific grounds for refund claims. The petitioner was constrained to opt for a residuary ground (k) due to the unavailability of the 'export of services - without payment of tax' category, leading to the rejection of the refund application.

4. The officer rejected the refund application primarily based on the categorization of services, despite the petitioner's explanation for opting the residuary clause and the discrepancy in ITC quantum. However, the respondent did not dispute the petitioner's entitlement to the refund, acknowledging the bonafide error made.

5. The court set aside the officer's decision to reject the refund, deeming it hypothetical to deny the refund solely based on the inadvertent error. A lenient view taken by the officer in a similar case supported the petitioner's claim. The officer was directed to issue the refund within eight weeks, ensuring the correct quantum as of the application date.

6. The writ petition was allowed without costs, emphasizing the rightful entitlement of the petitioner to the refund of ITC on non-taxable exports, highlighting the importance of fair consideration and rectification of genuine errors in tax matters.