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2025 (3) TMI 1298 - HC - GSTRefund of unutilized ITC on account of supplies made to SEZ units without payment of tax - violation of paragraph No. 8 of Circular No. 125/44/2019 dated 18.11.2019 - HELD THAT - This Court is of the view that once the respondents admit the entitlement of the petitioner to the quantum of refund then this Court has ample powers and the jurisdiction to direct the respondents to grant the petitioner the said refund. In the opinion of this Court the failure so to do would tantamount to a stamp of approval by this Court to the unjust enrichment on the part of the Department to the excess tax collected by it from the petitioner which it did not have authority to collect under Article 265 of the Constitution of India. Circulars of the Board are undoubtedly important to follow for both the Assessee and the Department. Today the operation of Tax Laws in India is largely procedural and based on interaction of the Assessee with the respective Departments through the respective portals. In the context of GST Excise Customs etc. Acts the supply movement claim of drawback refund Input Tax Credit etc. and the filing of the returns are to be uploaded on the portal strictly as per the prescribed Forms with strict adherence to the respective tax calendars. In all the cases the Department is right in contending that when the procedure has been laid down the same has to be followed in the manner prescribed or not at all. However in certain cases owing to situations beyond the control of the parties including the Department at times the performance of the duties of the Assessee often become impossible. This is the point of inflection where insistence on the procedure or the rigorous implementation of a certain Circular would defeat the substantive rights of the Assessee thereby causing miscarriage of justice. The adherence to the same cannot be extended to the point that the procedure followed in the Circular completely overpowers and extinguishes the substantive rights of the Assessee under the Act. It is precisely in this domain that the writ of this Court will issue. Thus in genuine cases of refund once the conscience of the Court is satisfied that the petitioner has the substantive right to refund in appropriate cases it becomes necessary in the interest of justice to exercise the jurisdiction under Articles 226 and 227 of the Constitution of India to hold that the procedure being a hand-maiden of substantive justice does not edge out the substantive rights of the petitioner. Otherwise it would tantamount to throwing the baby out with the bath-water. The impugned order issued by the respondent no. 4 and order issued by the respondent No. 5 rejecting the petitioner s appeal are hereby quashed and set aside - petition allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court were:
2. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The legal framework revolves around the CGST Act, which provides for the refund of unutilized ITC. The Board Circular No. 125/44/2019-GST dated 18.11.2019 is central to the dispute, as it limits the ability to claim a refund for supplies made to SEZ units without payment of tax to a single application. Court's interpretation and reasoning: The Court emphasized that a circular cannot override statutory provisions. It noted that the substantive right to a refund, as provided under the CGST Act, should not be negated by procedural limitations imposed by a circular. The Court relied on previous judgments, such as Shree Renuka Sugars Ltd. and Pee Gee Fabrics Private Limited, which established that technical errors or procedural lapses should not deny substantive rights when the conditions for entitlement are otherwise satisfied. Key evidence and findings: The petitioner had made an inadvertent error by omitting five purchase bills in the initial refund application, leading to an incorrect claim of ITC. The respondents did not dispute the petitioner's entitlement to the quantum of refund claimed in the second application but rejected it based on the procedural limitation of the circular. Application of law to facts: The Court applied the principle that substantive rights should not be extinguished by procedural technicalities. It found that the petitioner's substantive right to a refund was established, and the procedural limitation of the circular should not prevent the refund. Treatment of competing arguments: The respondents argued that the petitioner should have been more careful in the initial application and that the circular's procedural limitation was correctly applied. The Court, however, prioritized the substantive right over procedural adherence, noting that denying the refund would result in unjust enrichment of the Department. Conclusions: The Court concluded that the petitioner's substantive right to a refund should be honored, and the procedural limitation imposed by the circular should not bar the refund. 3. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: "Keeping in view the aforesaid decisions, it is settled law that the benefit which otherwise a person is entitled to once the substantive conditions are satisfied cannot be denied due to a technical error or lacunae in the electronic system." Core principles established:
Final determinations on each issue:
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