Kelvion INDIA PVT. LTD. vs. The Union Of INDIA Thr Secretary And Ors

Held

The Court decided to set aside the impugned orders dated 10 January 2022 and 27 March 2023 and remand the matter to the adjudicating authority. The Court noted that the GST Tribunal was not operational, making it impractical to relegate the Petitioner to that remedy. The primary reasoning for the remand was the recent decision in Hikal Ltd. vs. Union of India, which held that the omission of Rule 96(10) did not include provisions to save pending proceedings. The Court acknowledged that the adjudicating and appellate authorities did not have the benefit of this decision when passing their orders. Therefore, without making any definitive observations on the merits of the case or the impact of the Hikal Ltd. decision, the Court found it in the interest of justice to allow a fresh examination of the Petitioner's refund application and the show cause notice by the adjudicating authority. This fresh consideration must include the impact of the Hikal Ltd. decision, as well as all other contentions raised by both parties, including the issue of retrospectivity of Rule 86(4B) and the bar on filing two refund claims.

Facts

The Petitioner, Kelvion India Pvt. Ltd., manufactures and exports heat exchangers. They imported raw materials under advance authorisation, claiming exemption from basic customs duty and IGST. The Petitioner used these materials to manufacture goods for export. For exports between June 2019 and December 2019, they paid IGST and subsequently received refunds. The Directorate of Revenue Intelligence (DRI) alleged that the Petitioner breached Rule 96(10) of the CGST Rules, 2017, by misusing the advance authorisation benefits. To resolve this, the Petitioner repaid the IGST refunds received for June-December 2019 and July-September 2020, totaling Rs. 2,82,39,137, along with interest. The Petitioner then applied for a refund of this amount, claiming it exceeded the actual liability under Rule 96(10). Their refund application was rejected, and the appellate authority upheld this rejection, leading to the present writ petitions.

Key Issues

1. Whether the impugned orders rejecting the Petitioner's refund application and upholding the rejection are valid, considering the subsequent omission of Rule 96(10) of the CGST Rules, 2017, and the High Court's ruling in Hikal Ltd. vs. Union of India? Petitioner's arguments: The Petitioner contends that the omission of Rule 96(10) without saving provisions for pending proceedings, as held in Hikal Ltd., renders the original allegations of breach moot. They argue that the amount repaid was significantly more than any potential liability, and the matter should be remanded for fresh consideration of their refund application and the show cause notice in light of the Hikal Ltd. decision. Respondents' arguments: The Respondents argue that Rule 86(4B) of the CGST Rules cannot be given retrospective effect and that the impugned orders are free from error. They also contend that the Petitioner has an alternate remedy before the GST Tribunal.