Appellate authority confirms demand of Rs. 47,28,635, sets aside penalty under Section 122(2)(b).

The appellate authority upheld the decision to reject the excess refund claim, confirming a demand of Rs. 47,28,635/- along with interest. The penalty imposed under Section 122 (2) (b) was set aside as it exceeded the scope of the show cause notice. The appeal was disposed of accordingly.

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Issues Involved:
1. Wrongful claim of GST refund by the appellant.
2. Inclusion of ineligible ITC of Capital Goods and Input Services in the refund claim.
3. Mis-declaration and suppression of Net ITC value.
4. Applicability of penalty under Section 122 of the CGST Act, 2017.
5. Entitlement to refund under the "receipt under deemed export" provision.

Issue-wise Detailed Analysis:

1. Wrongful Claim of GST Refund by the Appellant:
The appellant, engaged in manufacturing and supply of Acrylic Yarn, filed a refund claim of Rs. 64,11,146/- under the Inverted Duty Tax Structure for May 2018. The adjudicating authority provisionally sanctioned 90% of the claim amounting to Rs. 57,65,530/-. Upon detailed scrutiny, it was found that the appellant had claimed an excess refund by including ineligible ITC of Capital Goods and Input Services, resulting in a wrongful refund claim of Rs. 47,28,635/-.

2. Inclusion of Ineligible ITC of Capital Goods and Input Services in the Refund Claim:
The adjudicating authority observed that the appellant included ITC of Rs. 51,97,848/- on Capital Goods and Rs. 1,76,403/- on Input Services in the Net ITC, which is contrary to Rule 89 (5) of the CGST Rules, 2017. The correct Net ITC should have been Rs. 67,07,782/- instead of Rs. 1,20,82,033/-. The refund claim was recalculated, and the appellant was found eligible for only Rs. 10,36,895/-, leading to an excess claim of Rs. 47,28,635/-.

3. Mis-declaration and Suppression of Net ITC Value:
It was established that the appellant mis-declared the Net ITC value with the intent to claim an inadmissible refund. The adjudicating authority confirmed the demand of Rs. 47,28,635/- and ordered its recovery along with interest under Section 74 (1) and Section 50 of the CGST/RGST Act, 2017.

4. Applicability of Penalty under Section 122 of the CGST Act, 2017:
The adjudicating authority imposed a penalty equal to the demand amount under Section 122 (2) (b) for suppression of facts. However, the appellant argued that the penalty should be under Section 122 (1) as per the show cause notice. The appellate authority found merit in this argument, stating that the adjudicating authority cannot travel beyond the scope of the show cause notice. Therefore, the penalty under Section 122 (2) (b) was set aside.

5. Entitlement to Refund under the "Receipt under Deemed Export" Provision:
The appellant contended that they were eligible for a refund under the "receipt under deemed export" provisions for capital goods procured under the EPCG Scheme. However, the adjudicating authority rejected this claim, stating that the appellant should have filed the refund under the relevant provisions related to deemed export. The appellate authority upheld this decision, emphasizing that the appellant's demand could not be accommodated at this stage due to the lack of provisions under the rules.

Conclusion:
The appellate authority upheld the adjudicating authority's decision to reject the excess refund claim and confirmed the demand of Rs. 47,28,635/- along with interest. However, the penalty imposed under Section 122 (2) (b) was set aside as it was beyond the scope of the show cause notice. The appeal was disposed of accordingly.

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