M/S. Hardik Textiles Through Its Prop. Hardik Patel vs. State Of Gujarat

Facts

The petitioner, M/s. Hardik Textiles, engaged a GST consultant who, due to an inadvertent mistake, provided the bank account details of another client, M/s. Meet Textiles, when filing a refund application for accumulated Input Tax Credit (ITC) on September 8, 2020. The refund amount of Rs. 7,59,531/- was credited to M/s. Meet Textiles' account in October 2020. Upon realizing the error, the petitioner arranged for the amount to be returned to the government's account via DRC-03 on December 9, 2020. The petitioner then filed a fresh refund application on February 7, 2021, which was rejected on March 25, 2021, citing a technical glitch. The petitioner approached the High Court seeking disbursement of the eligible refund to their correct bank account.

Held

The Court held that the petitioner should not be deprived of their legitimate refund due to an inadvertent mistake made by their consultant. The Court acknowledged that the amount had been mistakenly credited to the wrong account and subsequently returned to the government. The Court found that the rejection of the second refund application due to a "technical glitch" was not a valid reason to deny the petitioner their rightful claim, especially given the circumstances. The Court reasoned that the system's inability to process the refund correctly was a "technical glitch" that necessitated judicial intervention. The ratio decidendi is that genuine errors, particularly those made by third-party consultants, should not result in the forfeiture of legitimate tax refunds, and administrative systems should be flexible enough to accommodate such rectifications. The Court directed the refund amount to be credited to the petitioner's correct bank account, Account No. 00211101004059 with The Mehsana Urban Co-operative Bank Limited, within four weeks. Failure to comply would result in interest at 12% from the date of the second application. No further application would be necessary at a manual level.

Key Issues

1. Whether the petitioner should be penalized for an inadvertent mistake made by their consultant, leading to the refund being credited to a wrong account, and consequently denied their legitimate refund claim? (Question of law and fact, concerning principles of natural justice and equitable relief). 2. Whether the rejection of the second refund application due to a "technical glitch" is justified, especially when the amount has been returned to the government and the petitioner has made efforts to rectify the error? (Question of law and fact, concerning procedural fairness and administrative efficiency). Contentions: Petitioner: Argued that the mistake was not theirs but their consultant's, and they should not be deprived of their eligible refund due to this inadvertent error. They highlighted their efforts to rectify the situation, including returning the amount and filing a fresh application, and sought the refund to be credited to their correct account. They relied on the principle that genuine mistakes should not lead to undue hardship. Respondent (State): Did not dispute the chronology of events but characterized the issue as "technical." They acknowledged the mistake by the petitioner's Chartered Accountant and stated that the GSTN system had a "technical glitch" that prevented the refund from being processed correctly even on the second attempt. Their stand was that the system itself did not permit the refund to be processed as desired.