Shri Ganesh Handicraft vs. Union Of INDIA
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The petitioner, Shri Ganesh Handicraft, filed a writ petition seeking re-credit of an inadmissible refund claim determined by orders dated 26.09.2018 for September and November 2017. The petitioner also sought copies of demand orders if the refund was adjusted against outstanding liabilities. The Court had previously directed the respondents to clarify the basis for adjusting the refund amount. In response, the respondents filed an additional affidavit stating that two refund claims were filed, and portions were rejected as inadmissible. The rejected amounts were stated to have been adjusted against outstanding demands. However, the affidavit later clarified that there were no separate orders for such demands and, as per available records, no outstanding demands were pending against the taxpayer for which the refund amount was adjusted. The respondents' counsel conceded that there was no outstanding demand against the petitioner, making the withholding of re-credit unjustified.
Held
The Court held that the respondents were not justified in adjusting the inadmissible refund claim amounts against outstanding demands, as their own affidavit and counsel's submission confirmed the absence of any such outstanding demands against the petitioner. The reasoning was that the core justification for withholding the re-credit, i.e., adjustment against an outstanding demand, was found to be factually incorrect. The Court noted that the respondents' admission that no outstanding demands existed rendered their action of not re-crediting the amount unjustified. The ratio decidendi is that tax authorities cannot adjust refund amounts against non-existent demands, and if such an adjustment is made erroneously, the amount must be re-credited to the taxpayer's ledger. The Court allowed the appeal and directed the respondents to re-credit the specified amounts to the petitioner's credit ledger.
Key Issues
1. Whether the respondents were justified in adjusting the inadmissible refund claim amounts against outstanding demands when no such outstanding demands existed against the petitioner, as per Section 54(6) of the CGST Act, 2017 and relevant circulars? Petitioner's Contention: The petitioner argued that the respondents should re-credit the inadmissible refund amounts to their electronic credit ledger and, alternatively, provide copies of the demand orders justifying the adjustment. The petitioner contested the basis of the adjustment. Respondents' Contention: Initially, the respondents indicated that the refund was adjusted towards an outstanding demand and that the order was appealable. Subsequently, in their additional affidavit, they stated that the rejected refund amounts were adjusted against outstanding demands. However, they later conceded that there were no outstanding demands against the petitioner and that the withholding of re-credit was not justified. They relied on Circular No. 79/53/2018 dated 31.12.2018 regarding the submission of documents for refund processing.
Sections Cited
Section 54(6)
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Cause title — parties, addresses and appearances
Order 07/03/2024
The instant writ petition has been filed claiming the following reliefs:- “(I) respondents may be directed to re-credit the amount of inadmissible refund claim determined vide Orders dated 26.09.2018 (Annexure-4), both for the months of Sept and Nov 2017, back to petitioner’s electronic credit ledger; (ii) in the alternative and without prejudice, respondents may be directed to provide petitioner with the copy of demand orders pursuant to which it is stated in communication dated 19.07.2021 (Annexure-8) and 15.07.2022 (Annexure-11) that there exists outstanding liabilities;
[2024:RJ-JD:11558-DB] (2 of 4) [CW-13942/2022] (iii) Any other order or direction which this Hon’ble Court deems just and proper may kindly be passed.”
This Court had passed the following order on 17.01.2024:- “The re-credit of ITC to the petitioner was inter- alia refused by indicating that the amount has been adjusted towards outstanding demand. The petitioner in the petition specifically contested the said indication made in the impugned orders. However, in response to the writ petition, nothing has been indicated except for the fact that the order is appelable. Once notice is issued by the Court, such cursory response to the petition, cannot be entertained. Counsel for the respondents prays for time to place on record the material to indicate as to towards which outstanding demand of the petitioner, the amount of re-credit of ITC to which the petitioner was otherwise entitled, has been adjusted. List the matter on 14.02.2024.”
Accordingly, the respondents were directed to place on record as to whether if there was an outstanding demand against the petitioner.
1 The respondents have filed their affidavit, in which, it has been categorically mentioned that there is no such outstanding demands, which were pending against the tax-payers for which the refund amount was adjusted in RFD-06. The additional affidavit so filed by the respondents reads as under :-
That I am the officer in charge in the above noted case and am fully conversant with the facts of this case.
That the department through their counsel is filing this additional affidavit in compliance with the order dated 17.01.2024 of the Hon’ble High court.
That the Taxpayer filed two refund claims vide ARN- AA0809178512410 dated 21.02.2018 for Rs.30,52,473/- and ARN-AA081117558011 dated 21.02.2018 for Rs.11,18,303/-.
A Refund Order RFD-06 No. 377/2018-GST dated 26.09.2018 was issued by the department and out of total refund claim of Rs.30,52,473/-, a refund of Rs.28,88,417/- was sanctioned and remaining
[2024:RJ-JD:11558-DB] (3 of 4) [CW-13942/2022] inadmissible amount of Rs.1,64,056/- was rejected. Copy of form GST-RFD-01 B dated 29.09.2019 is enclosed as Annexure-1. The rejected amount so involved in the refund claim was adjusted against outstanding demand.
Further, vide Order RFD-06 No. 379/2018-GST dated 26.09.2018 was issued by the department and out of total refund claim of Rs.11,18,303/-, a refund of Rs.9,35,135/- was sanctioned and remaining inadmissible amount of Rs.1,83,168/- was rejected. Copy of from GST-RFD-01 B dated 29.09.2019 is enclosed as Annexure-2. The rejected amount so involved in the refund claim was adjusted against outstanding demand.
As per Section 54(6) of CGST Act, 2017, the refunds were sanctioned on a provisional basis, some amounts were inadmissible and the rest amounts were to be paid. Therefore, the taxpayer was informed vide email dated 16.09.2019 that refund ARNs was showing pending in the online system, they were directed to submit relevant documents of the both ARNs for processing of refund claims as per CGST Act/Rules, 2017. But the taxpayer neither responded nor submitted any relevant documents physically as per Circular No. 79/53/2018 dated 31.12.2018 issued by CBIC.
Since the taxpayer failed to comply and did not submit the relevant documents for processing of the refund claim, therefore, in terms of Circular No. 79/53/2018 dated 31.12.2018 issued by CBIC, the applicant was requested to file said refund ARNs physically, along with relevant documents in the juri ictional office within three days, in order to process the refund claim, failing which the refund applications will be closed without any further correspondence in the matter.
Due to non-submission of documentary evidence in support of the refund claims, the in-admissible amount was not re-credited in the taxpayer’s ITC ledger and the amount so involved in the refund claim was shown under the head – “g. Amount adjusted against outstanding demand under the existing law or under the Act.”
That due to non-furnishing of documentary
2018 issued by CBIC, out of total refund claim of
[2024:RJ-JD:11558-DB] (4 of 4) [CW-13942/2022] Rs.30,52,473/-, a refund of Rs.28,88,417/- was sanctioned and remaining inadmissible amount of Rs.1,64,056/- was adjusted against outstanding demand vide order dated 377/2018-GST dated 26.09.2018. 10. Further, due to non-furnishing of documentary
2018 issued by CBIC, out of total refund claim of Rs.11,18,303/-, a refund of Rs.9,35,135/- was sanctioned and remaining inadmissible amount of Rs.1,83,168/- was adjusted against outstanding demand vide order dated 379/2018-GST dated 26.09.2018. 11. That, there were no separate orders against which the demand had been adjusted. Further, as per records available at Juri ictional Range/Division Offices no such outstanding demands were pending against the taxpayer for which the refund amount was adjusted in RFD-06. 4. Learned counsel for the respondents upon being asked fairly submits that there was no outstanding demand against the petitioner, thus, the petitioner is entitled for re-credit of the amount for which, there was a rejection by the respondents.
The facts stated by the learned counsel for the respondents is fortified by para 4 and 5 of the affidavit filed by them.
Since the respondents themselves have come out with a stand that there was no outstanding demand against the petitioner and thus, withholding of re-credit was not justified, therefore, the appeal is accordingly allowed and the respondents are directed to re-credit the amount in question, as mentioned in the additional affidavit, to the credit ledger of the petitioner. (MUNNURI LAXMAN),J (DR. PUSHPENDRA SINGH BHATI),J 83-Sudheer/-
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.