Exxat Systems PVT. LTD. vs. State Of Gujarat
Original PDF →Facts
The writ-applicant, Exxat Systems Pvt. Ltd., engaged in IT consulting, sought a refund of Rs. 10,41,355 paid on exports made in June 2019. The applicant had opted for export on payment of tax for this period. A refund application was filed, but the authority partially rejected the claim by an order dated 17.02.2021, citing "Inadmissible (Entry Not Showing in Annexure B)". Although the authority later agreed to re-credit the rejected amount in the electronic credit ledger upon the applicant's declaration not to appeal, the re-credit could not be processed due to portal limitations. The applicant then filed a writ petition seeking quashing of the rejection order and direction for refund or re-credit.
Held
The Court held that the matter should be remitted to the adjudicating authority. It was observed that the refund application, clearly stated to be for exports on payment of tax, was adjudicated as if it were for refund of unutilized input tax credit pertaining to exports without payment of tax. This misclassification led to the partial rejection of the refund and the subsequent inability to re-credit the amount to the electronic credit ledger, despite an order for re-credit. Furthermore, the order rejecting the refund was passed without a show cause notice and was cryptic. Therefore, the impugned order dated 17.02.2021, to the extent of the refund rejection, was quashed and set aside. The matter was remanded for fresh adjudication of the rejected portion of the refund application. The Court also clarified that if a fresh application is required, it would be treated as pursuant to the remand order, and the issue of limitation would not be raised.
Key Issues
1. Whether the rejection of the refund claim for Rs. 10,41,355 for exports made on payment of tax was erroneous, particularly when the reason cited (absence in Annexure B) is applicable to exports without payment of tax, and whether the applicant was denied a proper opportunity of hearing before such rejection? Petitioner's Arguments: - The adjudicating authority erred by processing the refund application as if it were for export without payment of tax, despite the application clearly being for export with payment of tax. - The requirement of Annexure B, as per the circular dated 18.11.2019, is only for export without payment of tax. For exports on payment of tax, verification should focus on actual export and tax payment. - The rejection order was passed without issuing a show cause notice or providing an opportunity of hearing, leading to an erroneous decision. - The matter should be remitted back for fresh processing as the factum of export and tax payment is not disputed. Respondents' Arguments: - The learned AGP submitted that considering the prayer for remand by the petitioner's counsel, an appropriate order could be passed.
Sections Cited
Section 16
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Cause title — parties, addresses and appearances
ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)
By this writ-application under Article 226 of the Constitution of India, the writ-applicant has prayed for the following reliefs: C/SCA/6146/2022 JUDGMENT DATED: 07/04/2022 “A. This Hon’ble Court may be pleased to issue a writ of certiorari or writ in the nature of certiorari or any other appropriate writ or order quashing and setting aside order dated 17.2.2021 (annexed at Annexure A) to the extent refund claim of the Petitioner has been partially rejected; B. This Hon’ble Court may be pleased to issue a writ of mandamus or writ in the nature of mandamus or any other appropriate writ or order directing the Respondents to forthwith grant refund of the tax of Rs.10,41,355 paid on exports made for the month of June 2019 along with statutory interest on such refund; C. In the alternative this Hon’ble Court may be pleased to issue a writ of mandamus or writ in the nature of mandamus or any other appropriate writ or order directing the Respondents to forthwith grant re-credit of an amount of Rs.10,41,355 as per order of re-credit dated 17.2.2021; D. Pending notice, admission and final hearing of this petition, this Hon’ble Court may be pleased to direct the Respondents to forthwith grant refund or re-credit of the amount of tax of Rs.10,41,355; E. Ex parte ad interim relief in terms of prayer D may kindly be granted; F. Such further relief(s) as deemed fit in the facts and circumstances of the case may kindly be granted in the C/SCA/6146/2022 JUDGMENT DATED: 07/04/2022 interest of justice for which act of kindness your petitioner shall forever pray.”
The facts giving rise to the present writ-application may be summarised as under : 2(1) The writ-applicant is a private limited company engaged in the business of providing information technology consulting and support services. The writ- applicant is registered under the Central/Gujarat Goods and Services Tax Act, 2017 (for short, the ‘GST Acts’). 2(2) The writ-applicant exports services outside the country for which consideration is earned in foreign exchange. The export of the goods and services are ‘zero- rated supplies’ as per Section 16 of the IGST Act. 2(3) Section 16 of the IGST Act provides for the following two options to the exporters: (i) Export without payment of tax against bond or letter of undertaking in which case refund is admissible of unutilized input tax credit. (ii) Export on payment of tax in which case refund is admissible of tax paid on exports. 2(4) The writ-applicant availed of the first option for the exports made during the period from July 2018 to March 2019. However, for the month of June 2019, the writ- C/SCA/6146/2022 JUDGMENT DATED: 07/04/2022 applicant exported services on payment of tax by availing the second option. 2(5) Since the option of export on payment of tax was exercised for the month of June 2019, the writ-applicant paid the tax on such export transactions. 2(6) The writ-applicant filed refund application for the month of June 2019, wherein it was clearly mentioned that the reason for refund was export of services with payment of tax. 2(7) It is the case of the writ-applicant that the concerned authority had conveyed to the writ-applicant that ‘Annexure B’ containing list of input tax credit would also be required to be uploaded in accordance with the circular of the Central Board of Indirect Taxes dated 18.11.2019. 2(8) Although provisional refund of partial amount was granted, yet while processing the final refund, the refund of an amount of Rs.10,41,355=00 was rejected by the impugned order dated 17.2.2021 stating “Inadmissible (Entry Not Showing in Annexure B)”. 2(9) When the writ-applicant approached the authority regarding the rejection, the writ-applicant was told that while the refund cannot be granted, the writ-applicant would be entitled to the re-credit in the electronic credit ledger of the amount of refund rejected. The writ-applicant C/SCA/6146/2022 JUDGMENT DATED: 07/04/2022 was, however, told to give declaration that it would not file appeal against the order rejecting refund. 2(10) The writ-applicant, therefore, gave a declaration that it would not file appeal against the refund rejection order and request was made to grant the re-credit in the electronic credit ledger. Based on such declaration, the authority proceeded to pass the order of re-credit in respect of the refund amount which was rejected. 2(11) The writ-applicant orally followed up with the authorities on number of occasions to grant the re-credit in accordance with the order of the re-credit passed by the authority. However, the authority orally informed that the GST portal was not allowing the re-credit. 2(12) The writ-applicant gave written reminder on 9.2.2022 to either grant refund or grant re-credit in accordance with the order passed by the authority.
In such circumstances referred to above, the writ-applicant is here before this Court with the present writ-application. SUBMISSIONS ON BEHALF OF THE WRIT-APPLICANT :
Mr.Uchit Sheth, the learned counsel appearing on behalf of the writ-applicant has made the following submissions : C/SCA/6146/2022 JUDGMENT DATED: 07/04/2022 (a) The entire issue has arisen because of the error on the part of the adjudicating authority in processing the refund application as if it was a case of export without payment of tax even though the refund application actually was for export with payment of tax. The absence of entry in ‘Annexure B’ has been cited as the sole reason for partial rejection of the refund in the impugned order. However, the requirement of ‘Annexure B’ even as per the circular dated 18.11.2019 is only for the cases of export without payment of tax. Insofar as the export on payment of taxes are concerned, the authority has to only verify whether the goods or services have been exported or not, and whether the tax in respect of which refund is being claimed has been actually paid or not. Such error in processing of the refund has also led to a situation whereby the authority is unable to re-credit the rejected amount in the electronic credit ledger even though an order of re-credit has been passed. (b) The writ-applicant was not issued any show cause notice nor any opportunity of hearing was given before rejection of the refund, leading to an erroneous order being passed. If the impugned order qua the rejection of the refund is quashed and the matter is remitted back to the adjudicating authority for fresh processing of the refund in accordance with law, then the matter can be resolved since the factum of export of services and payment of tax is as such not in dispute. C/SCA/6146/2022 JUDGMENT DATED: 07/04/2022 SUBMISSIONS ON BEHALF OF THE RESPONDENTS :
Mr.Utkarsh Sharma, the learned AGP appearing on behalf of the respondents, submitted that looking to the facts and circumstances of the case, more particularly, since the learned counsel for the writ-applicant was only praying for remand of the matter to the adjudicating authority, an appropriate order may be passed by this Court.
ANALYSIS :
Having regard to the peculiar facts and circumstances of the case, we must accept the submissions of Mr.Sheth and remit the matter to the authority concerned. It appears that even though it was mentioned in the application for refund that it was an application pertaining to exports on payment of tax, the adjudicating authority appears to have adjudicated the application as if it was for refund of unutilized input tax credit pertaining to exports without payment of tax. This has created a situation whereby on one hand the refund has been partially rejected and on the other hand such partially rejected amount is not even being re-credited into the electronic credit ledger of the writ-applicant even though there is an order passed by the authority for re-credit of the rejected amount.
It also appears from the documents on record that the order partially rejecting the refund was passed without issuing any show cause notice to the writ-applicant and is also a non- speaking and cryptic order. C/SCA/6146/2022 JUDGMENT DATED: 07/04/2022
It will, therefore, be in the interest of justice that the impugned order dated 17.2.2021 (annexed at Annexure A), to the extent the refund application of the writ-applicant has been rejected, is quashed and set-aside and the matter is remanded to the adjudicating authority for deciding afresh the refund application of the writ-applicant to the extent the refund has been rejected. The refund which has already been granted to the writ-applicant may not be disturbed.
Since Mr.Sharma, the learned AGP has indicated that some procedural issues may again crop up while partly adjudicating the refund application, so as of abundant caution we clarify that the authority, if it so deems fit, may ask the writ- applicant to file a fresh application for the rejected portion of the refund amount which may be considered as a continuation of the original refund application. In other words, even if the authority requires a fresh refund application, the same would be treated as pursuant to the order of remand by this Court and the issue of limitation may not be raised by the authority.
With the aforesaid, this writ-application stands disposed of. The entire exercise shall be completed and the order adjudicating the refund claim of the writ-applicant may be passed within a period of four weeks from the date of receipt of order of this Court. (J. B. PARDIWALA, J.) (NISHA M. THAKORE,J) /MOINUDDIN
Reproduced from the public record of the Gujarat High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.