M/S Garden Silk Mills LTD vs. Union Of INDIA

Held

The Court held that the petitioner is entitled to the alternative relief prayed for in the petition. The Court noted that while the petitioner had not filed an appeal, they stated before the Court that they would not file an appeal against the rejection order and would file the required undertaking to comply with the Explanation to Rule 93 of the CG&ST Rules. The Court observed that the re-credit was not refused due to non-compliance with the Explanation to Rule 93, but because there was no mechanism for re-crediting the amount to the Electronic Credit Ledger. Therefore, the Court directed the third respondent to re-credit the amount of Rs. 17,55,13,818/- to the Electronic Credit Ledger on the basis of Form GST RFD-PMT-03. The petitioner was directed to file the undertaking as required. In case it was not possible to re-credit the amount to the Electronic Credit Ledger, the petitioner was to be permitted to manually take credit of the amount. This exercise was to be completed on or before April 19, 2019. The Court did not expressly leave any issue undecided.

Facts

M/s Garden Silk Mills Ltd. (the petitioner) filed six refund claims totaling Rs. 17,55,13,818/- for the period July 2017 to October 2017, seeking refund of accumulated input tax credit due to inverted duty structure, supplies to SEZ, and exports without payment of IGST. The claims were filed manually as online procedures were facing issues. The petitioner received deficiency memos on January 16, 2018, and responded by rectifying the deficiencies on January 18, 2018, and subsequently provided further requested information. However, the refund claims were rejected by an order dated March 7, 2018, on the grounds of failure to submit compliance or file a fresh application within the prescribed time limit, citing Circular No. 17/17/2017-GST. The petitioner contended that the rejection was based on incorrect grounds and that the respondents failed to follow the prescribed procedure. The petitioner sought to have the rejection order set aside and the refund granted, or alternatively, to have the amount re-credited to their Electronic Credit Ledger.

Key Issues

1. Whether the petitioner is entitled to a re-credit of Rs. 17,55,13,818/- to its Electronic Credit Ledger on the basis of Form GST RFD-PMT-03, considering the provisions of Rule 93(2) of the CG&ST Rules and its Explanation? The petitioner argued that Rule 93(2) mandates re-crediting the rejected refund amount to the Electronic Credit Ledger via Form GST PMT-03. They contended that even if the conditions in the Explanation to Rule 93 (appeal rejection or undertaking not to appeal) were not strictly met, the re-credit was still due. They further argued that the rejection was not on the grounds of non-compliance with the Explanation but due to a lack of mechanism to re-credit the amount online, and therefore, they should be permitted to manually take credit. The respondents argued that Rule 93(2) and its Explanation require either a final rejection of an appeal or a written undertaking from the claimant not to file an appeal for the re-credit to be processed. They asserted that since the petitioner had not provided such an undertaking, the re-crediting of the amount did not arise.