2025 (4) TMI 498 - HC - GST

Rejection of the refund claims - mode and manner of determination of the amount of budgetary support - rejection of part of the claim by adopting certain calculations which have not been made known to the petitioner - HELD THAT - From a careful reading of Para 5 of the Budgetary Support Scheme it becomes abundantly clear that an eligible unit manufacturing specified goods is entitled to budgetary support to be calculated at the rate of 58% of the central tax paid through debit in the cash ledger maintained under Section 49 (1) of CGST Act 2017 and 29% of IGST paid after utilization of the input tax credit of the central tax and integrated tax. This is so provided in Clauses 5.1(i) and %.1(ii). In the instant case the CGST on value addition would be 75% (Chapter 25 of Table of Excise Notification No.1/2020-CE dated 06.02.2010) of the total amount of CGSC paid for the quarter July 2021 to September 2021 which in any case would be exceeding the refund claimed. In view of the aforesaid we see no error or mistake committed by the petitioner claiming a refund of Rs.6, 87, 756/-. There is no good reason emerging from the impugned order passed by respondent No.3 to justify the rejection of claim of the petitioner for an amount of Rs.1678/- which the respondent No.3 has held to be an amount inadmissible on account of budgetary support. Conclusion - The rejection of claim of Rs.1678/- in respect of quarter July 2021 to September 2021 and Rs.7170/- for quarter January 2022 to March 2022 by respondent No.3 is held bad and contrary to the notification dated 05.10.2017. Respondent No.3 shall take steps for release of the amount held inadmissible by it in the sanction/rejection orders impugned in this petition passed in respect of CGST/IGST paid by the petitioner for quarters July 2021 to September 2021 and January 2022 to March 2022 respectively. Petition disposed off.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

1. Whether the petitioner is entitled to the full refund of the claimed budgetary support under the notification dated 05.10.2017, which provides for budgetary support to eligible units in the form of a refund of a percentage of CGST and IGST paid.

2. Whether the rejection of a part of the refund claim by the respondent was justified under the terms of the notification dated 05.10.2017.

3. Whether the calculation method used by the respondent to determine the refund amount was in compliance with the notification dated 05.10.2017.

ISSUE-WISE DETAILED ANALYSIS

1. Entitlement to Full Refund of Budgetary Support

- Relevant Legal Framework and Precedents: The notification dated 05.10.2017 issued by the Ministry of Commerce and Industry provides budgetary support to eligible units by refunding a percentage of CGST and IGST paid. The scheme is a continuation of benefits previously available under rescinded excise exemption notifications.

- Court's Interpretation and Reasoning: The Court noted that the petitioner was an eligible unit under the scheme and had filed refund claims as per the procedure outlined in the notification. The eligibility of the petitioner to receive budgetary support was not disputed by the respondent.

- Key Evidence and Findings: The petitioner had submitted refund claims for the specified periods, and the respondent had partially accepted these claims. However, a portion of the claims was rejected without clear reasoning.

- Application of Law to Facts: The Court examined the notification's provisions and found that the petitioner's claims were consistent with the notification's requirements. The Court emphasized that the notification's language was clear and unambiguous regarding the entitlement to budgetary support.

- Treatment of Competing Arguments: The respondent argued that the rejection was based on calculations consistent with the notification, but failed to provide details of these calculations. The Court found this lack of transparency problematic.

- Conclusions: The Court concluded that the petitioner was entitled to the full refund claimed, as the rejection was not supported by the notification's provisions.

2. Justification of Rejection of Part of the Refund Claim

- Relevant Legal Framework and Precedents: The notification specifies the percentages of CGST and IGST to be refunded and the conditions under which these refunds are applicable.

- Court's Interpretation and Reasoning: The Court found that the rejection of part of the refund claim was contrary to the notification's provisions, which clearly outline the method for calculating the refund amount.

- Key Evidence and Findings: The respondent did not provide a clear explanation for the rejection of the refund amount, which was a key issue in the Court's analysis.

- Application of Law to Facts: The Court applied the notification's provisions to the facts of the case and determined that the rejection was unjustified.

- Treatment of Competing Arguments: The respondent's failure to disclose the calculation method undermined their argument. The Court emphasized the importance of transparency in such calculations.

- Conclusions: The Court held that the rejection of the refund claim was not justified and directed the respondent to release the withheld amounts.

3. Compliance of Calculation Method with Notification

- Relevant Legal Framework and Precedents: The notification outlines the specific method for calculating the refund, including the percentages of CGST and IGST to be refunded.

- Court's Interpretation and Reasoning: The Court found that the respondent's calculation method was not disclosed, making it impossible to verify compliance with the notification.

- Key Evidence and Findings: The lack of transparency in the calculation method was a significant issue, as it prevented the petitioner from understanding the basis of the rejection.

- Application of Law to Facts: The Court applied the notification's calculation method to the petitioner's claims and found that the full refund was justified.

- Treatment of Competing Arguments: The respondent's failure to provide a clear calculation method weakened their position. The Court stressed the need for clarity and adherence to the notification's provisions.

- Conclusions: The Court concluded that the respondent's calculation method did not comply with the notification, and the petitioner was entitled to the full refund claimed.

SIGNIFICANT HOLDINGS

- Preserve Verbatim Quotes of Crucial Legal Reasoning: "The rejection of part of refund claim of the petitioner by respondent No.3 flies in the face of clear and unambiguous language of Notification dated 05.10.2017."

- Core Principles Established: The Court established that the notification's provisions must be followed precisely, and any rejection of claims must be clearly justified and transparent.

- Final Determinations on Each Issue: The Court determined that the petitioner was entitled to the full refund claimed and directed the respondent to release the withheld amounts for the specified periods.