Kunal Autotech Private Limited vs. Union Of INDIA & Ors.

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W.P.(C)/9760/2024HC DelhiGSTCNR DLHC01041642202419 September 2024Bench: HON'BLE MR. JUSTICE VIBHU BAKHRU,HON'BLE MR. JUSTICE SACHIN DATTA5 pages

For Petitioner: Ms Gunjan Richharia, AdvocateFor Respondent: Ms Garima Sachdeva, SPC Mr Amit Acharya, GP Ms Divyanshi Maurya, Advocate for UOI/R1. Mr Gibran Naushad, SSC for R2 - R5

AI SummaryRemanded

Facts

The petitioner, Kunal Autotech Private Limited, filed a refund application for accumulated input tax credit (ITC) of ₹68,34,872/- for zero-rated supplies in September 2022. The adjudicating authority, by an order-in-original dated 30.12.2022, sanctioned a refund of ₹67,92,118/-, rejecting the balance. The Revenue, following a review, appealed this order under Section 107(3) of the CGST Act, arguing that ₹12,04,443/- of the refund was wrongly sanctioned due to a mismatch in ITC as per GSTR-2B and GSTR-3B. The appellate authority, by an order-in-appeal dated 22.01.2024, set aside the order-in-original to the extent of ₹12,04,443/-, faulting the adjudicating authority for not properly addressing the reconciliation statement and the ITC mismatch.

Held

The Court held that the appellate authority, while faulting the adjudicating authority for not sufficiently discussing the reconciliation statement and the ITC mismatch, also failed to address these issues itself. The appellate authority's order-in-appeal dated 22.01.2024 was set aside because it did not decide the question in issue as mandated by Section 107(11) of the CGST Act, which prohibits remanding the matter. Instead, the appellate authority should have made its own findings on the reconciliation. Therefore, the Court found it appropriate to remand the matter back to the appellate authority for a fresh consideration. The appellate authority is directed to decide the appeal afresh after providing an opportunity of being heard to both parties. The issue of whether the refund of ₹12,04,443/- was wrongly sanctioned due to ITC mismatch and the adequacy of the reconciliation statement was expressly left to be decided by the appellate authority on remand.

Key Issues

1. Whether the appellate authority erred in setting aside the order-in-original to the extent of ₹12,04,443/- without adequately addressing the petitioner's reconciliation statement, as required by Section 107(11) of the CGST Act. Petitioner's contention: The petitioner argued that the appellate authority failed to consider the reconciliation statement submitted by them and did not provide sufficient discussion or findings on it, despite faulting the adjudicating authority for the same. They contended that the appellate authority, by not deciding the issue of reconciliation itself, acted contrary to Section 107(11) of the CGST Act, which prohibits remanding the matter. Revenue's contention: The Revenue argued that the adjudicating authority erred in sanctioning the refund of ₹12,04,443/- due to a mismatch in ITC as per GSTR-2B and GSTR-3B, and that the appellate authority correctly identified this error and set aside the order to that extent.

Sections Cited

Section 54, Section 107(3), Section 107(11)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

W.P. (C) 9760/2024 Page 1 of 5 $~93 * IN THE HIGH COURT OF DELHI AT NEW DELHI % Date of Decision : 19.09.2024 + W.P.(C) 9760/2024 KUNAL AUTOTECH PRIVATE LIMITED .....Petitioner Through: Ms Gunjan Richharia, Advocate versus UNION OF INDIA & ORS. .....Respondents Through: Ms Garima Sachdeva, SPC Mr Amit Acharya, GP Ms Divyanshi Maurya, Advocate for UOI/R1. Mr Gibran Naushad, SSC for R2 - R5. CORAM: HON'BLE MR. JUSTICE VIBHU BAKHRU HON'BLE MR. JUSTICE SACHIN DATTA VIBHU BAKHRU, J. (ORAL) 1. The petitioner has filed the present petition, inter alia, impugning the order-in-appeal dated 22.01.2024 (hereafter the impugned order), whereby the order-in-original dated 30.12.2022 passed by the adjudicating authority has been aside. 2. The petitioner is registered under the Central Goods and Services Tax Act, 2017 (hereafter the CGST Act) and has been assigned the Goods and Services Tax Identification Number (GSTIN) – 07AAHCK9263H1Z6. Digitally Signed By:DUSHYANT RAWAL Signature Not Verified W.P. (C) 9760/2024 Page 2 of 5 3. The petitioner filed an application dated 02.11.2022 claiming accumulated input tax credit (hereafter the ITC) for a sum of ₹68,34,872/- on account of zero rated supply effected in the month of September 2022. Pursuant to the said application, the adjudicating authority issued the Show Cause Notice dated 23.12.2022 in the form of GST RFD-08 and called upon the petitioner to show cause why its application for refund under Section 54 of the CGST Act should not be rejected, for the reasons mentioned in the said Show Cause Notice. 4. The petitioner replied on 28.12.2022 to the aforesaid Show Cause Notice in GST RFD-09 addressing the allegations / points as raised in the Show Cause Notice. Thereafter, by the order-in-original dated 30.12.2022, the adjudicating authority sanctioned refund of ₹67,92,118/- against the demand, while rejecting the balance. 5. The order-in-original was subject matter of review under Section 107(2) of the CGST Act. The reviewing authority concluded that the refund of ₹12,04,443/- was wrongly sanctioned to the petitioner and directed that appeal be filed against the order-in-original dated 30.12.2022. Accordingly, in terms of the review order, the Revenue preferred an appeal against the order-in-original, under Section 107(3) of the CGST Act, before the appellate authority. According to the Revenue, the refund to the extent of ₹12,04,443/- was liable to be rejected on account of mismatch in ITC as per GSTR-2B and GSTR-3B. 6. The petitioner was issued the Show Cause Notice dated 06.07.2023 by the appellate authority and the petitioner responded to the same by the letter Digitally Signed By:DUSHYANT RAWAL Signature Not Verified W.P. (C) 9760/2024 Page 3 of 5 dated 26.12.2023. In its response, the petitioner submitted a reconciliation statement. The appellate authority found in favour of the Revenue and held that the adjudicating authority had erred in not addressing the question of mismatch between the GSTR-2B, GSTR-3B as well as mismatch of ITC in respect of one issue between GSRT-2B and GSRT-3B in respective of another issue. The appellate authority faulted the adjudicating authority for placing reliance on the reconciliation statement submitted by the petitioner without sufficient discussion. The paragraphs no.8 & 9 of the impugned order passed by the appellate authority are relevant and set out below:- “8. In view of the above, I find that the order passed by the adjudicating authority without placing on record the reasons for conclusion and the rationale/premise to negate the evidence contained in the show cause notice appears to be in-admissible. The question of mismatch between GSTR-2B and GSTR-3B, GSTR-1 & GSTR-3B, (in respect of issue 8.1) and mismatch of ITC as per GSTR 2B & GSTR 3B (in respect to issue 8.2) have not been addressed properly by the Adjudicating Authority and reliance has been placed on the reconciliation of the respondent without sufficient discussion. The question of verification has not been concluded and the same has been left open without actual quantification which was verification dependent. Thus, I find that the adjudicating authority has to come at a conclusion based upon proper verification and quantification, and only then the refund should have been granted. Leaving the question of verification open and granting refund without the

requisite exercise makes the impugned order erroneous and unsustainable.

In view of the aforementioned discussion and W.P. (C) 9760/2024 findings and after going through the judgement as discussed supra, I am of the considered view that the adjudicating authority has erred in allowing refund of ITC amounting to Rs. 12,04,443/- out of the total refund claim of Rs. 68,34, 172/- which is liable to be recovered from the respondent. The impugned order passed by the adjudicating authority is neither legal nor maintainable in law and as such the same are liable to be set aside up to that extent. Accordingly, I pass the following order:”

It is apparent from the above, that although the appellate authority has faulted the adjudicating authority for not carefully examining the reconciliation statement and passing a refund order to the extent of ₹12,04,443/- without sufficient discussion, the appellate authority has also not examined the question of reconciliation. There is neither any discussion nor any finding regarding the reconciliation statement furnished by the petitioner.

In terms of Section 107(11) of the CGST Act, the appellate authority is required to decide the question in issue and cannot remand the matter to the adjudicating authority. In the present case, although, the appellate authority has faulted the adjudicating authority in not addressing the question of reconciliation statement, the appellate authority has also not addressed the same.

In the given circumstances, we consider it apposite to set aside the impugned order and remand the matter to the appellate authority for consideration afresh. W.P. (C) 9760/2024 10. The appellate authority shall decide the appeal afresh after affording the parties an opportunity of being heard.

11.

The petition is disposed of in the aforesaid terms.

VIBHU BAKHRU, J

SACHIN DATTA, J SEPTEMBER 19, 2024 M

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Reproduced from the public record of the Delhi High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.