M/S Shree K R Engineering Works vs. Union Of INDIA
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M/s Shree K R Engineering Works (the petitioner) filed a writ petition seeking permission to file a refund claim application for December 2018 under the "Any Other" category on the GST portal, or alternatively, to file a physical refund application. The petitioner also sought to quash two orders: an Order-in-Original dated May 24, 2020, and an Order-in-Appeal dated July 21, 2020, passed by respondent authorities. The petitioner requested that any computational mistakes in their refund application be ignored. The core of the dispute appears to stem from an alleged inadvertent arithmetical error in a previous refund claim, leading to a claim for a lower amount than admissible, and the subsequent attempt to claim the differential amount.
Held
The Court held that the controversy in the present case is covered by the decision of the Gujarat High Court in Special Civil Application No.22339/2022-Shree Renuka Sugars LTD. vs. State of Gujarat. The Court observed that the petitioner's inability to file the supplementary refund claim under the correct category on the portal, due to the system's limitations after an initial claim for the same period had been processed, constituted a technical error. The Court reasoned that such technical errors should not lead to the rejection of a refund claim without examining it on its merits. Relying on precedents like M/s Bodal Chemicals Ltd. and M/s. Stitchwell Garments, the Court emphasized that procedural issues or technical glitches should not obstruct substantive rights. The Court directed the petitioner to furnish manually the refund applications for the left-out amount, granting liberty to the respondent authorities to scrutinize the claim in accordance with law and take an appropriate decision within three months. The Court did not expressly leave any issue undecided.
Key Issues
1. Whether the petitioner can be permitted to file a refund claim application for December 2018 under the "Any Other" category on the GST portal, or alternatively, to file a physical refund application, considering alleged technical glitches and arithmetical errors in previous claims. Petitioner's arguments: The petitioner contends that they are entitled to file the refund claim for the differential amount due to an inadvertent arithmetical error. They argue that the GST portal did not allow them to file a supplementary claim under the correct category (accumulated ITC for export of goods without payment of tax) for the same period, forcing them to select "Any Other." They rely on various High Court decisions, including Shree Renuka Sugars LTD. vs. State of Gujarat, M/s Bodal Chemicals Ltd., and M/s. Stitchwell Garments, which emphasize that technical glitches or procedural irregularities should not defeat substantive rights and that procedural law aids substantive law. Revenue's arguments: The judgment does not explicitly record arguments made by the respondents. However, the existence of the Orders-in-Original and Orders-in-Appeal suggests the revenue authorities had previously rejected the petitioner's claim or approach.
Sections Cited
Section 54(1)
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Cause title — parties, addresses and appearances
Order 10/05/2024 This present petition filed by the petitioner with the following prayer: a)Your Lordships may be pleased to issue a writ of certiorari or a writ in the nature of mandamus or any other appropriate writ, order or direction, to the respondents to arrange to permit and/or entail the petitioner to file the refund claim application for the period Dec.2018 under “Any Other” category on GST portal; and/or in alternate Petitioner may kindly permitted to file physical Refund Application for the month of December 2018 before the concerned Authority. b) Both the Orders i.e. O-I-O dated 24,05,2020 (Annexure-4). As well as O-I-A dated 21.07.2020 (Annexure.6) passed by the Respondent Authorities may kindly be quashed and set aside.
[2024:RJ-JD:21058-DB] (2 of 7) [CW-11245/2020] c) direction may be given to respondent Authority to consider the refund application ignoring computational mistake. d) petitioner may be permitted to file his GSTR RED- 01A/RFD-01 for the Period of December 2018. e) any other and/or other appropriate writ, order or direction which this Hon’ble Court consider just and proper in the facts and circumstances of the Case may kindly be passed in favour of the petitioner. Learned counsel for the parties agreeable that the controversy involved in this case is covered by the decision passed by Gujarat High Court in Special Civil Application No.22339/2022- The relevant part of the decision reads as follows:
The present is a case for the petitioner’s refund claims of unutilized ITC used in making zero-rated supply of goods during the period of 11 months in Financial Year 2020-2021 and 2021-2022. Learned advocate for the petitioner submitted that petitioner has been legally entitled to refund of a sum aggregating to Rs.1,10,67,67,172/- for these 11 months, however, the petitioner erroneously lodged claims for a lower amount of Rs. 1,00,47,38,439/- due to inadvertent arithmetical error of the employee of the petitioner. It is submitted that the respondents has sanctioned and paid refund aggregating to Rs. 1,00,47,38,439/-. It is the case of the petitioner that when the petitioners realized the error, they have lodged supplementary refund claims for the left out amount of refund being Rs. 10,20,28,733/-, however, the respondents have refused to sanction and pay such refund on a ground that the category under which such supplementary claims were lodged was not applicable in the case of the petitioner.
Thus, from the aforesaid provisions, it is clear that the "refund amount" means the maximum refund that is admissible. In the present case, the respondents have not disputed that the maximum refund that is admissible is Rs.1,00,47,38,439 and not the amount of Rs.1,10,67,67,172/-. However, the stand of the respondent is that the petitioner is responsible for the error committed by the employee of the petitioner in claiming the refund of lower amount than the maximum admissible amount.
From the record, it appears that out of Rs.1,10,67,67,172/-, the respondent has already granted refund for an amount of Rs.1,00,47,38,439/-, and therefore, the dispute is with regard to
[2024:RJ-JD:21058-DB] (3 of 7) [CW-11245/2020] refund of an amount of Rs.10,20,28,733/-. When the petitioner realized the arithmetical error committed while submitting the applications for refund for particular months, supplementary applications have been made for getting the refund of aforesaid amount of Rs.10,20,28,733/- within statutory period laid down under Section 54(1) of the CGST Act. It is the case of the petitioner that while showing the category of refund application, the petitioner has shown "any other" as the category because refund applications for these 11 months had already been made under Clause 7(c) i.e. accumulated ITC category for export of goods without payment of tax and the same had been sanctioned and paid by CGST officers. It is also relevant to note that as the petitioner already filed refund application under Clause 7(c) i.e. accumulated ITC category at first point of time, for the same month and same period, another/supplementary application for the refund of the differential amount of refund (not claimed by the petitioner on account of arithmetical error on the part of the petitioner) cannot be filed on the portal and therefore there was no option for the petitioner to submit the application under the category "any other". Thus, we are of the view that this is nothing but technical error and for such technical error, the claim of the petitioner cannot be rejected without examining the same by the respondent authority on its own merits and in accordance with law.
At this stage, we would like to refer to the decision rendered by the Hon'ble Supreme Court in the case of VKC Foodsteps India Private Limited (supra), wherein the Hon'ble Supreme Court observed in para 88, 99 and 142 as under:
"
The jurisprudential basis furnishes a depiction of an ideal state of existence of GST legislation within the purview of a modern economy, as a destination-based tax. But there can be no gain saying the fact that fiscal legislation around the world, India being no exception, makes complex balances founded upon socio-economic complexities and diversities which permeate each society. The form which a GST legislation in a unitary State may take will vary considerably from its avatar in a nation such as India where a dual system of GST law operates within the context of a federal structure. The ideal of a GST framework which Article 279A(6) embodies has to be progressively realized. The doctrines which have been emphasized by Counsel during the course of the arguments furnish the underlying rationale for the enactment of the law but cannot furnish either a valid basis for judicial review of the legislation or make out a ground for invalidating a validly enacted law unless it infringes constitutional parameters. While adopting the constitutional framework of a GST regime, Parliament in the exercise of its constituent power has had to make and draw balances to accommodate the interests of the States. Taxes on alcohol for human consumption and stamp duties
[2024:RJ-JD:21058-DB] (4 of 7) [CW-11245/2020] provide a significant part of the revenues of the States. Complex balances have had to be drawn so as to accommodate the concerns of the states before bringing them within the umbrella of GST. These aspects must be borne in mind while assessing the jurisprudential vision and the economic rationale for GST legislation. But abstract doctrine cannot be a ground for the Court to undertake the task of redrawing the text or context of a statutory provision. This is clearly an area of law where judicial interpretation cannot be ahead of policy making. Fiscal policy ought not be dictated through the judgments of the PART F High Courts or this Court. For it is not the function of the Court in the fiscal arena to compel Parliament to go further and to do more by, for instance, expanding the coverage of the legislation (to liquor, stamp duty and petroleum) or to bring in uniformity of rates. This would constitute an impermissible judicial encroachment on legislative power. Likewise, when the first proviso to Section 54(3) has provided for a restriction on the entitlement to refund it would be impermissible for the Court to redraw the boundaries or to expand the provision for refund beyond what the legislature has provided. If the legislature has intended that the equivalence between goods and services should be progressively realized and that for the purpose of determining whether refund should be provided, a restriction of the kind which has been imposed in clause (ii) of the proviso should be enacted, it lies within the realm of policy. xxx xxx xxx
We must be cognizant of the fact that no constitutional right is being asserted to claim a refund, as there cannot be. Refund is a matter of a statutory prescription. Parliament was within its legislative authority in determining whether refunds should be allowed of unutilised ITC tracing its origin both to input goods and input services or, as it has legislated, input goods alone. By its clear stipulation that a refund would be admissible only where the unutilised ITC has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies, Parliament has confined the refund in the manner which we have described above. While recognising an entitlement to refund, it is open to the legislature to define the circumstances in which a refund can be claimed. The proviso to Section 54(3) is not a condition of eligibility (as the assessees' Counsel submitted) but a restriction which must govern the grant of refund under Section 54(3). We therefore, accept the submission which has been urged by Mr N Venkataraman, learned ASG.
The above judicial precedents indicate that in the field of taxation, this Court has only intervened to read down or interpret a formula if the formula leads to absurd results or is unworkable. In the present case however, the formula is not ambiguous in nature or unworkable, nor is it opposed to the intent of the legislature in granting limited
[2024:RJ-JD:21058-DB] (5 of 7) [CW-11245/2020] refund on accumulation of unutilised ITC. It is merely the case that the practical effect of the formula might result in certain inequities. The reading down of the formula as proposed by Mr Natarjan and Mr Sridharan by prescribing an order of utilisation would take this Court down the path of recrafting the formula and walk into the shoes of the executive or the legislature, which is impermissible. Accordingly, we shall refrain from replacing the wi om of the legislature or its delegate with our own in such a case. However, given the anomalies pointed out by the assessees, we strongly urge the GST Council to reconsider the formula and take a policy decision regarding the same." 12.1.In the aforesaid decision, the Hon'ble Supreme Court has an occasion to deal with the issue where the High Court has expanded the provision for refund beyond what the legislature has provided, and therefore, the aforesaid decision would not render any assistance to learned AGP in the facts of the present case.
Now, we would like to refer to the decisions relied on by the learned advocate appearing for the petitioner. In the case of Bombardier Transportation India Pvt. Ltd. (supra), the Division Bench of this Court observed in para 23 and 25 as under:
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The writapplicant submits that as per its understanding, the EDI system, which is an electronic system developed and managed by the respondent no.3 with an objective to digitalize transmission of shipping bills between Respondents, suffers from lacunae that it does not permit amendment, which is specifically permitted in terms of Section 149 of the Customs Act, 1961, to be carried electronically through EDI system. It is a settled law that the benefit which otherwise a person is entitled to once the substantive conditions are satisfied cannot be denied due to a technical error or lacunae in the electronic system. xxx xxx xxx
In view of the above, the present writ- application succeeds and is hereby allowed. The respondents nos.1 and 2 are directed to grant the benefits of the MEIS to the writ- applicant within a period of four weeks from the date of the receipt of this order."
In the case of M/s Bodal Chemicals Ltd. (supra), the Division Bench of this Court observed in para 9 and 11 as under:
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We are of the view that the respondents cannot raise their hands in despair saying that it is not possible to correct or take care of the technical glitches. The writ applicant herein has been running from pillar to post requesting the respondents to provide a solution and take care of the technical error and glitch that occurred as regards furnishing the GSTR - 6 return for recording and distributing the I credit of Rs.20,52,989/-. As usual, there is no response at the end of the GSTN. The writ
[2024:RJ-JD:21058-DB] (6 of 7) [CW-11245/2020] applicant is not allowed to distribute the I credit of Rs.20,52,989/- as the same has not been recorded, reported and declared in the GSTR - 6 return. xxx xxx xxx
For all the aforegoing reasons, this petition succeeds and is hereby allowed. The respondents are directed to allow the writ applicant to furnish manually the GSTR - 6 return with details of the I credit of Rs.20,52,989/- and also permit distribution of such credit to the constituents of the writ applicant. Let this entire exercise be undertaken within a period of six weeks from the date of the receipt of writ of this order." 13.2.In the case of M/s. Stitchwell Garments (supra), the Division Bench of this Court observed and held in para 5.2 to 5.4 and 6 as under: "5.2 The entitlement of the petitioner for availment under export scheme is not in dispute. Entering a particular code to receive the benefit was only part of procedure. It could not overreach or obliterate the substantive right claimable by the petitioner once the petitioner was eligible under the scheme to get the benefit. The decisions relied on by the learned advocate for the petitioner lay down that technical glitch ought not to have been permitted to take toll of the petitioner's rights under the scheme to avail the benefits.
3 Supreme Court in Saiyad Mohammad Bakar El- Edroos (Dead) By Lrs. Vs. Abdulhabib Hasan Arab & Ors. [(1998) 4 SCC 343], held that procedure cannot operate to defeat the ends of justice, it must stand to the aid of justice, "
A procedural law is always in aid of justice, not in contradiction or to defeat the very object which is sought to be achieved. A procedural law is always subservient to the substantive law. Nothing can be given by a procedural law what is not sought to be given by a substantive law and nothing can be taken away be the procedural law what is given by the substantive law."
4 Even if the petitioner had entered wrong scheme code, it was only "5.2 Law conceives a clear differentiation between illegality and irregularity. This nice distinction brings home the case of the petitioner. An illegality is something which amounts to substantial failure in compliance of requirement. It denotes such breach of rule or requirement which alters the position of a party in terms of his right or obligation. Illegality denotes a complete defect in the juri iction or proceedings. Illegality is properly predictable in its radical defects. It is a situation contrary to the principle of law. As against this, an
[2024:RJ-JD:21058-DB] (7 of 7) [CW-11245/2020] irregularity as defined lexicographically, is want of adherence to some prescribed rule or mode of proceedings. It consist in omitting the rule something that is necessary for due and orderly conducting of a suit or doing it in an unreasonable time or improper manner. In Law Lexicon by R. Ramanatha Aiyar, 1997 Edition, irregularity is defined as "a neglect of order or method; not according to regulations; the doing of an act at an unreasonable time, or in an improper manner; the technical term for every defect in practical proceedings or the mode of conducting an action or defence, as distinguished from defects in pleading. Irregularity is failure to observe that particular course of proceedings which, conformable with the practice of the court, ought to have been observed".
In the aforesaid view, the petition deserves to be allowed. Resultantly, the decision of Respondent Director General of Foreign Trade reflected in email communication dated 10.06.2021 refusing to change the Scheme Code from 19 to 60 in EDI shipping bills is hereby set aside. Respondents no.1 and 2 herein are directed to accept the application of the petitioner for export benefits under the Scheme of Rebate of State and Central taxes and Levies (RoSCTL) in respect of 70 shipping bills referred to in order dated 04.01.2021, the Principal Commissioner of Customs, Customs House, Mundra. The acceptance of the petitioner's application may be by manual mode if the system does not permit the correction. The application of the petitioner for the above purpose shall be deemed to have been filed with Code 60." In the light of the aforesaid decision, the joint acceptance of its applicability, the present petition is disposed of with liberty to the petitioner to furnish manually the refund applications for refund of the left out amount. However, it is open for the respondent authorities to scrutiny the claim of the petitioner for refund of the amount in accordance with law and to take appropriate decision on the applications which may be made by the petitioner. Let this exercise be undertaken by the respondents within a period of three months from the date of receiving the certified copy of this order. (YOGENDRA KUMAR PUROHIT),J (DR.PUSHPENDRA SINGH BHATI),J 26-Arti/-
Reproduced from the public record of the Rajasthan High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.