2025 (4) TMI 502 - 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 is more than the refund claimed. In view of the aforesaid we see no error or mistake committed by the petitioner claiming a refund of Rs. 1, 53, 331/-. There are 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. 48, 640/- which the respondent No. 3 has held to be an amount inadmissible on account of budgetary support. Conclusion - The rejection of claim of Rs. 48640/- in respect of quarter July 2021 to September 2021 and Rs. 64496/- 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 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 rejection of the refund claims by the Deputy Commissioner, CGST Division, Samba (respondent No. 3) is in violation of the notification dated 05.10.2017 issued by the Government of India, Ministry of Commerce & Industry, Department of Industrial Policy & Promotion.

2. How should the budgetary support be calculated under the notification dated 05.10.2017, particularly regarding the percentages of CGST and IGST paid through debit in the cash ledger account after utilization of input tax credit?

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Violation of Notification dated 05.10.2017

- Relevant legal framework and precedents: The notification dated 05.10.2017 provides a scheme of budgetary support to eligible manufacturing units, specifying the calculation of support as 58% of the CGST and 29% of the IGST paid through debit in the cash ledger account after utilizing input tax credits.

- Court's interpretation and reasoning: The Court found that the rejection of part of the refund claim by respondent No. 3 contradicted the clear language of the notification. The eligibility of the petitioner for the budgetary support was not disputed, and the rejection was based on undisclosed calculations.

- Key evidence and findings: The petitioner was eligible for the scheme, having availed benefits under the rescinded excise exemption notifications. The refund claims for the periods in question were filed according to the notification, yet partially rejected without explanation.

- Application of law to facts: The Court applied the provisions of the notification to the facts, noting that the petitioner had complied with the scheme's requirements and that the rejection lacked a valid basis.

- Treatment of competing arguments: The respondents argued that the rejection was due to unsupported claims under the scheme. However, they failed to provide a rationale for their calculations, which the Court found insufficient.

- Conclusions: The Court concluded that the rejection of the refund claims was unjustified and contrary to the notification.

Issue 2: Calculation of Budgetary Support

- Relevant legal framework and precedents: Paragraph 5 of the notification outlines the determination of budgetary support, specifying percentages of CGST and IGST paid after utilizing input tax credits.

- Court's interpretation and reasoning: The Court interpreted the notification as requiring budgetary support to be calculated based on the percentages of taxes paid through debit in the cash ledger after input tax credit utilization. The Court emphasized the need for transparency in the calculation process.

- Key evidence and findings: The petitioner had paid the required taxes and claimed refunds accordingly. The lack of clarity in the respondent's calculation method was a critical issue.

- Application of law to facts: The Court applied the notification's provisions to the petitioner's situation, confirming the petitioner's entitlement to the claimed refund amounts based on the taxes paid.

- Treatment of competing arguments: The respondents' failure to explain their calculation method weakened their position. The Court highlighted the importance of adhering to the notification's clear guidelines.

- Conclusions: The Court concluded that the petitioner was entitled to the full refund amounts claimed, as the calculations should align with the notification's stipulations.

SIGNIFICANT HOLDINGS

- 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 judgment reinforces the principle that administrative decisions must adhere to the clear terms of governing notifications and that transparency in decision-making processes is essential.

- Final determinations on each issue: The Court determined that the petitioner was entitled to the full refund amounts claimed for the periods in question, and the rejection of portions of these claims was contrary to the notification dated 05.10.2017. Respondent No. 3 was directed to release the amounts held inadmissible.