Bmg Informatics PVT LTD vs. The Union Of INDIA And 3 Ors

Held

The Court held that both the order of the Assistant Commissioner and the order of the Joint Commissioner (Appeals) were unsustainable in law. Regarding the Assistant Commissioner's order, the Court found that it was based on a circular that conflicted with the statutory provisions of Section 54(3)(ii) of the CGST Act, 2017. The Court emphasized that statutory provisions prevail over administrative circulars, and therefore, the reasoning in paragraph 3.2 of Circular No. 135/05/2020-GST, which restricted refund in cases of same input and output supplies, had to be ignored. However, the Court also found the Joint Commissioner (Appeals)'s order unsustainable because it reversed the Assistant Commissioner's order solely on the ground of violation of natural justice without making any further inquiry into whether the tax rate on input supplies was higher than on output supplies. The Court reasoned that a procedural defect should not lead to an automatic refund without a substantive examination of the claim. Consequently, the matter was remanded back to the Assistant Commissioner to consider the refund claim afresh, to factually determine whether the rate of tax on input supplies was higher than on output supplies, and to pass a reasoned order accordingly. The Court directed the Assistant Commissioner to complete this process within six weeks.

Facts

BMG Informatics Pvt. Ltd., a registered dealer under the CGST Act, 2017, filed a refund claim under FORM-GST-RFD-02 for the period October-December 2018. The Assistant Commissioner, CGST, Guwahati, issued a show-cause notice alleging mis-declaration of turnover. The assessee replied, but the Assistant Commissioner rejected the refund claim of Rs. 3,92,594/- by an order dated May 22, 2020. The rejection was based on the reasoning that the input and output supplies being the same, even if attracting different tax rates depending on the buyer, did not fall under Section 54(3)(ii) of the CGST Act, 2017, citing Circular No. 135/05/2020-GST. The assessee appealed, and the Joint Commissioner (Appeals) reversed the Assistant Commissioner's order on November 6, 2020, solely on the ground of violation of natural justice as the issue was not in the show-cause notice.

Key Issues

1. Whether the rejection of the refund claim by the Assistant Commissioner, based on paragraph 3.2 of Circular No. 135/05/2020-GST, which stated that refund under Section 54(3)(ii) of the CGST Act, 2017, is not available when input and output supplies are the same, is legally sustainable? Petitioner's argument: The petitioner contended that the Assistant Commissioner's order was unsustainable as it relied on a circular that conflicted with the statutory provisions of Section 54(3)(ii) of the CGST Act, 2017. They argued that the statutory provision should prevail over the circular. Revenue's argument: The revenue's position, as reflected in the Assistant Commissioner's order, was that the refund was not admissible under Section 54(3)(ii) because the input and output supplies were the same, despite potentially attracting different tax rates. 2. Whether the appellate order of the Joint Commissioner (Appeals), which set aside the Assistant Commissioner's order solely on the ground of violation of principles of natural justice without examining the merits of the refund claim, is legally sustainable? Petitioner's argument: The petitioner argued that the appellate order was also unsustainable because it failed to address the substantive issue of whether the refund was due under Section 54(3)(ii) and merely relied on a procedural ground. Revenue's argument: The revenue implicitly supported the need for a proper factual determination of the refund claim, as indicated by the subsequent remand.