2023 (12) TMI 1278 - HC - GST

Refund of the input tax credit including cess - petitioner s application was rejected on mere apprehension that its supplier had issued fake invoices - HELD THAT - This Court had also noted that there are no findings on the basis of the cogent material that the invoices issued by one of the petitioner s suppliers (M/s Shruti Exports) were fake. It was also noticed that there was no allegation that the petitioner had not exported the supplies in respect of which refund of ITC on inputs was claimed. Accordingly, the petition was allowed and the respondents were directed to process the petitioner s claim for refund. An application for refund by a tax payer is required to be examined in entirety. If there are any grounds for requiring further clarification or proof, the concerned officer is at liberty to issue a show cause notice setting out all the grounds on which the application is proposed to be rejected. This affords a tax payer an opportunity to meet the allegations and provide such material to satisfy the concerned officer. Once that exercise is done, the concerned officer has to pass a final order either accepting the tax payer s claim for refund or rejecting it. The reasons for such rejection are required to be clearly stated in the order - A tax payer has an opportunity to appeal against the said order before the Appellate Authority. It is important to note that the Appellate Authority is required to consider the appeal and pass an appropriate order, however, it cannot remand the matter to the concerned adjudicating authority for considering it afresh. In the present case, after this Court had passed an order, the adjudicating authority once again issued a show cause notice dated 07.07.2023. This is impermissible. The respondents were required to pass an order for sanctioning the refund in accordance with the law and not to re-adjudicate the application once again. Application disposed off.

Summary

Issues involved:
The issues involved in the judgment are clarification regarding the processing of a refund application under Section 54 of the Central Goods and Services Tax Act, 2017, and the permissible actions by the respondents after a court order directing the processing of the refund application.

Clarification regarding refund processing:
The respondents sought clarification on processing the petitioner's application for refund of input tax credit including cess, following a court direction. The respondents restarted scrutinizing the application and issued a show cause notice requiring further documents/proofs. The respondents found the documents provided by the petitioner insufficient, leading to a request for clarification on processing the refund under Section 54 of the CGST Act.

Judicial review of refund application rejection:
The petitioner's refund application was initially rejected by the respondents based on apprehensions regarding fake invoices from a supplier. The petitioner appealed this rejection, and the Appellate Authority upheld the rejection. However, the High Court reviewed the rejection and found it based on mere apprehension without concrete evidence of fake invoices or non-export of supplies. Consequently, the High Court directed the respondents to process the petitioner's refund claim.

Procedural fairness in refund application examination:
The High Court emphasized that a tax payer's refund application must be examined thoroughly, and if further clarification is needed, a show cause notice should outline all grounds for potential rejection. The tax payer should have the opportunity to respond to the allegations and provide necessary material. Once this process is completed, the concerned officer must issue a final order clearly stating the reasons for acceptance or rejection of the refund claim.

Appellate authority's role and finality of proceedings:
The Appellate Authority has the power to confirm, modify, or annul the decision on a refund application but cannot remand the matter back to the adjudicating authority for a fresh consideration. This ensures finality in the proceedings and indicates the legislative intent to conclude matters at the appellate stage without further adjudication. In this case, the respondents' re-issuance of a show cause notice after the High Court's order was deemed impermissible.

Permissible actions by respondents post-court order:
While the respondents were granted liberty to take action if they found material warranting proceedings against the petitioner, such actions should not involve re-adjudicating the refund application. If any wrongful claim is discovered, the respondents can initiate appropriate proceedings under Sections 73 and 74 of the CGST Act. The judgment disposed of the application accordingly, emphasizing the need for adherence to legal procedures and finality in decisions.