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

Held

The Court held that the GST Tribunal was not operational, making it impractical to relegate the Petitioner to that alternate remedy in the peculiar facts of the case. The Court noted that the Petitioner was asked to return refunds based on an alleged breach of Rule 96(10), and the issue of Rule 86(4B) was also involved. Citing its recent decision in Hikal Ltd. (supra), which stated that the omission of Rule 96(10) was without saving provisions for pending proceedings, the Court found that the adjudicating and appellate authorities did not have the benefit of this decision. Therefore, without making observations on the merits of the case or the impact of the Hikal Ltd. decision, the Court decided that remanding the matter to the adjudicating authority for a fresh decision would serve the interest of justice. The impugned orders were quashed and set aside, and the matter was remanded to the adjudicating authority to decide the Petitioner's refund application and the show cause notice afresh, considering the impact of the Hikal Ltd. decision and all other contentions raised by both parties, including the issue of retrospectivity and the bar for filing two refund claims. The adjudicating authority was directed to decide the matter expeditiously, within six months, and to consider written submissions from both parties.

Facts

The Petitioner, Kelvion India Pvt. Ltd., a manufacturer and exporter of heat exchangers, imported raw materials under an advance authorisation, claiming exemption from basic customs duty and IGST. The Petitioner used these materials to manufacture finished goods for export. For exports between June 2019 and December 2019, the Petitioner paid IGST and subsequently received a refund. The Directorate of Revenue Intelligence (DRI) alleged that the Petitioner had breached Rule 96(10) of the CGST Rules, 2017, by not exclusively using the advance-authorisation-imported raw materials for exports. To avoid controversy, the Petitioner repaid the IGST refunds received for June-December 2019 and July-September 2020, amounting to 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). This refund application was rejected, and the appellate authority upheld the rejection. The Petitioner filed these writ petitions challenging these orders.

Key Issues

1. Whether the Petitioner is entitled to a refund of the IGST amount paid back, considering the alleged breach of Rule 96(10) of the CGST Rules, 2017, and the subsequent omission of this rule? (Question of law) Petitioner's contention: The Petitioner argued that the amount repaid exceeded the actual liability under Rule 96(10), which was significantly more than what would have been payable if the rule was applicable and violated. They also relied on the Bombay High Court's decision in Hikal Ltd. Vs. Union of India, which held that Rule 96(10) was omitted without provisions for saving pending proceedings, rendering arguments about its breach or the invocation of Rule 86(4B) inapplicable. Therefore, the matter should be remanded for fresh consideration of the refund application and show cause notice. Revenue's contention: The Revenue contended that Rule 86(4B) cannot be interpreted retrospectively and that there were no errors in the impugned orders. They also argued that the Petitioner had an alternate remedy before the GST Tribunal.