Srinagar: While imposing a cost of Rs 30,000 on the Union Territory’s Goods and Services Tax (GST) Department for wrongfully withholding the amount of tax paid in excess by an entrepreneur, the J&K High Court has held that the time limit for refund of GST is to be determined from the date of the original application and not from the date of follow-up application.
The judgment followed a petition by M/s Hallmark, a Jammu-based garment manufacturer, who was issued a deficiency memo by the GST authorities. The follow up application, which it had filed for GST refund at the advice of the department, was rejected as time barred.
A division bench comprising Justices Tashi Rabstan and Justice Puneet Gupta allowed the writ petition by the entrepreneur and quashed the deficiency memo dated 15.10.2020 issued by Assistant Commissioner, GST (respondent No 2).
The judges ordered “the respondents, particularly respondent No.2, is directed to process and release the GST refund of petitioner along with interest at the rate of 7 percent from the date the same fell due to the petitioner concern till the date of its final realization”.
The bench held that since the respondents have wrongfully withheld the amount of tax paid in-excess by the petitioner, it directed them “to bear and pay the costs to the petitioner concerned through its authorized partner Vimal Sachdeva within a period of two months after proper verification and identification”.
The costs were quantified at Rs 30,000. The bench made it clear “in case the respondents fail to deposit the costs in the Registry within the aforesaid period, Registrar (Judicial) is directed to frame a separate robkar against them, after notice and list it before the court”.
The petitioner sought to quash deficiency memo issued by Assistant Commissioner under Section 54 of Central Goods and Services Tax Act, 2017, whereby the application for refund of GST paid by the petitioner concerned had been rejected on the ground of limitation.
The petitioner averred that in the event of return of the goods, if any, the tax in the shape of GST already deposited, is adjusted in the Tax Liability of the subsequent months.
Further, in case on the date of filing of the final return, if any excess deposit of tax is there, a refund of the tax paid-in-excess is claimed.
The case of the petitioner was that during the months of January, February, March and July, 2018 the goods returned by the customers exceeded the outward supply though the output tax on those returned goods had already been charged by the J&K Goods and Services Tax Department.
Since the tax in the shape of GST had already been deposited on those returned goods, the same was to be adjusted as Tax Liability in the subsequent months.
However, it was not done in respect of those returned goods. Since there was excess deposit of tax by the petitioner, therefore, on the date of filing of the final return a refund of the tax paid-in-excess was to be claimed. The refund calculated was at Rs 2,91,650.
The court concurred with the petitioner that it had filed the final GST return on 20.09.2018. The follow-up application, which came to be filed by the petitioner concerned only on the advice of respondent No.2, was in continuation to the proceedings related to the original application.
It said “as such the time period to claim the refund of GST was required to be determined based on the original application and not the follow-up application. Therefore, the follow-up application cannot be said to be a new application, rather the same was in continuation to the original application as the proceedings in the first application had not come to an end”.
The bench made it clear “if the proceedings under the first application had come to an end, then the second application cannot be taken to be in continuation of the first application. Further, the character or nature of the second application can in no way be said to be different from that of the original application, rather the same was part of the proceedings in continuation to the first application. Therefore, the claim of petitioner concern can in no way be said to be barred by limitation”.
As regards the claim of petitioner that no opportunity of being heard was afforded to it by the respondents before rejecting its claim, the court said “Rule 92(3) specifically provides that no application for refund shall be rejected without giving the applicant an opportunity of being heard”.
“On this score alone the impugned deficiency memo requires to be quashed,” directed the court.
