2021 (1) TMI 1168 - Commissioner - GST

Appellate authority affirms rejection of refund claim citing time-bar, GSTR-3B, Section 54(3); appeal dismissed. (1)

The appellate authority upheld the adjudicating authority's decision, confirming the rejection of the refund claim. The appellant's arguments regarding ... Refund of unutilised input tax credit - time bar under Section 54(1) read with Explanation (2)(e) to Section 54 - relevant date for refund of ITC accumulated due to inverted tax structure - retrospective amendment of Rule 61(5) by Notification No. 49/2019 - calculation of refund under Rule 89(5) - classification of refund claim (inverted duty structure vs. IGST on import)Refund of unutilised input tax credit - time bar under Section 54(1) read with Explanation (2)(e) to Section 54 - Refund claim for the period October, 2017 to December, 2017 is time barred and liable to be rejected. - HELD THAT: - The adjudicating authority rejected the refund application in part on the ground that the claim for October-December 2017 was filed after the expiry of two years from the relevant date. Section 54(1) prescribes that refund applications must be made before expiry of two years from the relevant date, and the definition of relevant date (Explanation (2)(e)) governs refund of unutilised ITC arising from inverted duty structure. Applying these provisions, the authority found that the claim for October-December 2017, filed on 5 2 2020, was beyond the two year limitation and therefore time barred. The appellate authority concurred with this conclusion and found no merit in the appellant's contention that Section 54(3) dispenses with the two year limit. The two year limitation under Section 54(1), read with the relevant explanation, applies to refund of unutilised ITC; the specific provision relied on by the appellant does not oust the limitation. Accordingly, the claim for October-December 2017 was correctly rejected as time barred. [Paras 6]Claim for October, 2017 to December, 2017 is time barred and rejection is upheld.Relevant date for refund of ITC accumulated due to inverted tax structure - retrospective amendment of Rule 61(5) by Notification No. 49/2019 - Notification No. 49/2019 does not validate computing the two year period from 9 10 2019 for the purpose of the appellant's refund claim. - HELD THAT: - The appellant argued that GSTR 3B was declared a return under Section 39 only by Notification No. 49/2019 (dated 9 10 2019) and that therefore the two year limitation should be reckoned from that date. The appellate authority examined the notification and observed that it had retrospective effect from 1 7 2017 by substituting Rule 61(5), thereby declaring the circumstances in which GSTR 3B operates as the return specified under Section 39. The authority held that the appellant's interpretation-treating 9 10 2019 as the relevant date for computing limitation-was a misreading of the notification. The retrospective operation and the statutory scheme did not afford the appellant a fresh two year period from 9 10 2019, and the contention was accordingly rejected. [Paras 6]Appellant's contention that the two year period begins from 9 10 2019 is rejected; the notification does not validate the claim as timely.Calculation of refund under Rule 89(5) - No refund was available for the period January, 2018 to March, 2018 after recomputation under the Rule 89(5) formula. - HELD THAT: - The adjudicating authority re calculated the refundable amount for January-March 2018 using the formula in Rule 89(5) and recorded that there was no refund payable. The appellate authority reviewed the recalculation and agreed with the adjudicating authority's application of the statutory formula (Maximum Refund Amount = {(Turnover of inverted rated supply) x Net ITC / Adjusted Total Turnover} - tax payable on such supplies). On that basis, it held that no refund was due for January-March 2018. The appellate authority accepted the adjudicating authority's factual and mathematical conclusion and found no infirmity. [Paras 6]Claim for January, 2018 to March, 2018 yields no refund on recomputation under Rule 89(5); rejection is upheld.Classification of refund claim (inverted duty structure vs. IGST on import) - The appellant's refund claim was filed in an incorrect category; the claim related to IGST on import rather than to inverted duty structure as per Section 54(3). - HELD THAT: - The appellant asserted that IGST paid in cash on import was lying unutilised following business closure and that refund should be allowed. The appellate authority observed that the claim was presented as one for accumulation due to inverted duty structure under Section 54(3), but on the material on record the circumstances did not fit the scheme of inverted duty refund. The authority concluded that the refund claim was pleaded in the wrong category and that the filings did not establish entitlement under the inverted duty provisions. This classification error further supported the rejection of the claim. [Paras 6]Refund claim misclassified; it pertains to IGST on import rather than refund under inverted duty provisions, supporting rejection.Appellant's assent to show cause notice - Rejection of the refund claim is sustainable because the appellant agreed with the show cause notice and recorded no objection. - HELD THAT: - The impugned order recorded that the claimant agreed with the show cause notice and had no objection to rejection of the refund claim. The appellate authority found that this concurrence by the appellant rendered the adjudicating authority's rejection proper. Given the appellant's assent to the factual and legal bases in the show cause notice, there was no ground to interfere with the adjudicating authority's exercise of power in rejecting the claim. [Paras 6, 7]Appellant's agreement with the show cause notice renders the adjudicating authority's rejection proper; the appellate order upholds the rejection.Final Conclusion: The appellate authority upheld the Order in Original rejecting the refund application. The claim for October-December 2017 was held time barred; the claim for January-March 2018 yielded no refundable amount on recomputation under Rule 89(5); the appellant's contention that Notification No. 49/2019 created a fresh two year period was rejected; the claim was also found to be misclassified. The appeal is dismissed and the adjudicating authority's order is affirmed. Issues Involved:1. Time-barred refund application.2. Validity of GSTR-3B as a return under Section 39 of the CGST Act, 2017.3. Applicability of Section 54(3) for refund of unutilized ITC.4. Incorrect category of refund claim.Detailed Analysis:1. Time-barred Refund Application:The appellant filed a refund application amounting to Rs. 4,30,000/- for the period of October 2017 to March 2018 of accumulated ITC on account of Inverted Tax Structure under Section 54(3) of the CGST Act, 2017. The adjudicating authority observed that the refund application was filed after the expiry of two years from the relevant date, as per Section 54(1) of the CGST Act, 2017, and issued a show cause notice stating the application was liable to be rejected due to delay. The appellant contended that the relevant date for the refund claim should be the date when Notification No. 49/2019-Central Tax, dated 9th October 2019, came into force, which declared GSTR-3B as a valid return under Section 39. However, the adjudicating authority and the appellate authority found that the notification had retrospective effect from 1st July 2017, making the refund application time-barred.2. Validity of GSTR-3B as a Return Under Section 39:The appellant argued that GSTR-3B was not considered a return under Section 39 until the issuance of Notification No. 49/2019-Central Tax on 9th October 2019. Therefore, the two-year period for filing the refund should be counted from this date. However, the appellate authority clarified that the notification had retrospective effect from 1st July 2017, meaning GSTR-3B was always considered a valid return under Section 39. Consequently, the appellant's interpretation was incorrect, and the refund application was indeed time-barred.3. Applicability of Section 54(3) for Refund of Unutilized ITC:The appellant claimed that Section 54(3) allowed for the refund of unutilized ITC without any time limit. However, the appellate authority clarified that Section 54(1) and sub-section (14) of Section 54 of the CGST Act, 2017, clearly mention the two-year time limit for filing refund applications. Therefore, the appellant's argument that there was no time limit for claiming refunds under Section 54(3) was incorrect and not acceptable.4. Incorrect Category of Refund Claim:The appellant filed the refund claim under the category of ITC accumulated due to Inverted Tax Structure but mentioned in the appeal that the business was closed, and IGST paid in cash on import of goods was lying unutilized. The appellate authority found that the appellant had filed the refund claim in the wrong category, as it was not a case of Inverted Duty Structure as defined under Section 54(3) of the CGST Act, 2017.Conclusion:The appellate authority upheld the order of the adjudicating authority, finding no infirmity in the rejection of the refund claim. The appeal was disposed of, confirming that the refund application was time-barred, the relevant date for the refund claim was correctly interpreted, the time limit for filing refund applications under Section 54(1) was applicable, and the refund claim was filed under the incorrect category.