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 acknowledged that the GST Tribunal is not yet operational, making it impractical to relegate the Petitioner to that remedy in this peculiar case. The Court noted the recent decision in Hikal Ltd. (supra) which held that the omission of Rule 96(10) was without provisions to save pending proceedings. While not making definitive observations on the impact of Hikal Ltd. or the issues raised, the Court found that remanding the matter to the adjudicating authority for a fresh decision, considering the Hikal Ltd. judgment, would serve the interest of justice. The adjudicating authority is directed to decide afresh the Petitioner's refund application dated 20 August 2021 and the show cause notice dated 1 December 2021, expeditiously and within six months. The authority must hear the parties, consider the impact of Hikal Ltd., and address all contentions, including those about retrospectivity and the bar for 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 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 breached Rule 96(10) of the CGST Rules, 2017, by not exclusively using the imported raw materials for exported goods. To avoid controversy, the Petitioner repaid the refunds received for June-December 2019 and July-September 2020, amounting to Rs. 2,82,39,137/-, plus interest of Rs. 38,19,915/-. 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. The Petitioner filed these writ petitions challenging these orders.

Key Issues

1. Whether the Petitioner is entitled to a refund of the amount repaid, considering the alleged breach of Rule 96(10) of the CGST Rules, 2017, and the subsequent omission of this rule? Petitioner's arguments: The Petitioner contends 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 rely on the Bombay High Court's decision in Hikal Ltd. Vs. Union of India & Ors., which held that Rule 96(10) was omitted without 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 their refund application and the show cause notice. Respondents' arguments: The Respondents argue that Rule 86(4B) cannot be interpreted retrospectively and that the impugned orders contain no errors. They also contend that the Petitioner has an alternate remedy before the GST Tribunal.