2024 (8) TMI 241 - HC - GST

Dismissal of petitioner s appeal under Section 107 of the CGST Act - refund of the accumulated ITC - zero-rated supply under Section 16 of the Integrated Goods and Services Tax Act, 2017 - HELD THAT - In the present case, the Proper Officer has not issued any deficiency memo and thus, it must be assumed that all documents necessary for processing the refund claim, as required under Rule 89 (2) of the CGST Rules, were filed along with the refund application. In the aforesaid view, the proper officer s demand to provide BRCs, bank statements and ledger accounts of the suppliers for further evaluation was not sensu stricto in conformity with Rule 92 (3) of the CGST Rules inasmuch as there is no ground for the proper officer to be satisfied that the petitioner s application for refund was required to be rejected on those grounds. Insofar as failure to furnish BRCs before the proper officer is concerned, it is relevant to note that the petitioner s claim for refund was on account of export of goods. Section 16 (1) of the IGST Act provides that the expression zero rated supplies includes export of goods or services or both. Section 16 (3) of the IGST Act provides that a registered person who makes zero rated supplies shall be eligible to claim refund of unutilized ITC on supply of goods or services or both without payment of integrated tax under a bond or a Letter of Undertaking, in accordance with the provisions of Section 54 of the CGST Act. Thus, in terms of Section 16 (3) of the IGST Act, the petitioner is entitled to refund of unutilized ITC on export of goods. The petitioner did furnish the BRCs evidencing the realization of sale proceeds of export of goods. This is noted by the appellate authority in the impugned order. Notwithstanding the same, the appellate authority did not accept the BRCs by referring to Rule 96B of the CGST Rules. Rule 96B(1) of the CGST Rules provides that where refund of unutilized ITC on account of export of goods has been paid to an applicant but the sale proceeds have not been realized in full within such period as provided under FEMA including any extension thereof, the persons to whom refund is made are required to deposit the same along with applicable interest within a period of thirty days of the stipulated period within which the sale proceeds were required to be realized. Since in the present case, the petitioner had produced the BRCs evidencing realization of sale proceeds as also noted in the impugned order the petitioner s application for refund could not be rejected for the reason that BRCs evidencing receipt of sale proceeds, were not produced within the period of nine months of export of goods and that was fatal to the petitioner s claim for refund of unutilized accumulated ITC in respect of zero-rated supply. Furnishing of bank statements and ledger accounts of suppliers - HELD THAT - The petitioner provided the bank statements and had also provided the details of the suppliers as is evident from the petitioner s response in FORM GST RFD-09 furnished on 21.10.2022. However, the adjudicating authority found that the ledger accounts provided by the petitioner were incomplete and hence, the payments against the inward supplies could not be verified with the bank statements. It thus, rejected the petitioner s application for refund. The appellate authority upheld the said order. However, the reason set out in the impugned order are somewhat different from the reason as set out in the impugned refund rejection order. The adjudicating authority had rejected the petitioner s claim as it was not satisfied that the petitioner had made payment for the inward supplies. In this regard, the learned counsel for the petitioner submits that the petitioner had, in fact, provided details of its bank accounts as well as the ledger accounts of the suppliers maintained in its books of account - The adjudicating authority was not satisfied that inward supplies were paid for by the petitioner. As noted above, the petitioner claims that it had paid for inward supplies in respect of which it had claimed refund of ITC. It is considered apposite to remand the matter to the adjudicating authority for a decision afresh on the limited question whether the petitioner had made payment to the suppliers for inward supplies in respect of which it claims refund of accumulated ITC - petition disposed off by way of remand.

Summary

Issues Involved:

1. Discrepancy in invoices not reflected in GSTR-2A.
2. Requirement to provide E-Way bills of inward and outward supplies.
3. Requirement to provide Bank Realization Certificates (BRCs).
4. Requirement to provide bank statements and ledger accounts of suppliers.

Detailed Analysis:

Issue 1: Discrepancy in Invoices Not Reflected in GSTR-2A

The petitioner's application for refund was initially proposed to be rejected due to certain invoices not being reflected in the return (GSTR-2A) for November 2021. The petitioner responded to the Show Cause Notice (SCN) and the adjudicating authority accepted the explanation regarding these invoices. Therefore, this issue was resolved in favor of the petitioner and did not contribute to the final rejection of the refund application.

Issue 2: Requirement to Provide E-Way Bills of Inward and Outward Supplies

The petitioner was also required to provide E-Way bills for inward and outward supplies. The petitioner complied with this requirement, and the adjudicating authority was satisfied with the explanation provided. Consequently, this issue was also resolved and did not affect the final decision.

Issue 3: Requirement to Provide Bank Realization Certificates (BRCs)

The adjudicating authority rejected the petitioner's application for refund on the ground that the petitioner failed to provide BRCs. The appellate authority upheld this decision, reasoning that granting the refund would be an empty formality since the petitioner would have to re-deposit the amount due to non-receipt of sale proceeds within nine months.

However, the court noted that Section 16 of the IGST Act entitles the petitioner to a refund of unutilized ITC on export of goods. The definition of "export of goods" under Section 2(5) of the IGST Act does not include the condition of receiving payment in convertible foreign exchange, unlike "export of services" under Section 2(6).

Further, Circular No. 125/44/2019-GST clarified that realization of consideration is not a pre-condition for the export of goods. Therefore, the petitioner's claim for refund could not be rejected on the ground of non-furnishing of BRCs. Additionally, the petitioner did furnish BRCs during the appellate proceedings, which was ignored by the appellate authority. The court found that the reasoning of the appellate authority was flawed and that the petitioner's application for refund could not be rejected on this ground.

Issue 4: Requirement to Provide Bank Statements and Ledger Accounts of Suppliers

The petitioner was required to provide bank statements and ledger accounts of suppliers for further verification. Although the petitioner provided these documents, the adjudicating authority found them to be incomplete and rejected the refund application on this basis. The appellate authority upheld this decision but also referred to Section 16(2)(c) of the CGST Act, which requires that the tax charged on supply must be paid to the government.

The court noted that the SCN did not allege that the tax had not been deposited by the suppliers, making the reference to Section 16(2)(c) irrelevant. The adjudicating authority's apprehension was whether the petitioner had made payment for the inward supplies. The petitioner claimed to have provided the necessary details, and the court found it appropriate to remand the matter to the adjudicating authority for re-examination of whether the petitioner had made payments for the inward supplies.

Conclusion:

The court set aside the impugned order and the refund rejection order, remanding the matter to the adjudicating authority to re-examine whether the petitioner had made payments for the inward supplies. The petitioner was allowed to file necessary documents, and the adjudicating authority was directed to pass a reasoned order after providing an opportunity for a hearing. The petition was disposed of accordingly.