2021 (11) TMI 153 - HC - GST

Court grants refund in writ petition, sets aside Order-in-Appeal, citing Article 226. Respondents directed to refund balance.

M/s. Appario Retail Private Limited, Versus The Union of India, Through its Revenue Secretary, Department of Revenue, Ministry of Finance New Delhi and others.

The court allowed the writ petition, set aside the Order-in-Appeal, and held that the petitioner is entitled to a refund of the balance in the electronic ... Maintainability of the writ petition - Refund of excess amount lying to the credit of electronic cash ledger of the petitioner - applicability of proviso to sub-section (1) of Section 54 or sub-section (1) of Section 54 - HELD THAT:- Once it is held that the amount collected by ECO and paid to the Government under Section 52(3) of the CGST Act is tax to which the supplier is entitled to take credit in his electronic cash ledger under subsection (7) of Section 52, the provisions of Section 54 of CGST Act would apply for claiming refund of the same. The balance amount in the electronic cash ledger till it is appropriated by making payment towards discharge of liability of tax, interest or any other amount to the Government, would be the amount available to the ‘registered person’ in whose name the said electronic cash ledger is maintained. Therefore, the stand of the respondents that since the amount collected by ECO under Section 52 of the CGST Act is not paid by the petitioner by himself and therefore, it is not entitled to claim refund of the same, is totally misplaced. As the petitioner is claiming refund balance in electronic cash ledger, it is covered by the proviso to sub-section (1) of Section 54 and would not fall under sub-section (1) of Section 54. Maintainability of the writ petition - HELD THAT:- Though an effective remedy of appeal to the Appellate Tribunal is provided under Section 109 of the CGST Act, it is an admitted fact that the said Tribunal has not yet been constituted, though more than 3 years have elapsed after the CGST Act has been introduced. Thus, the petitioner cannot be compelled to wait for eternity to agitate its claim seeking refund of the amount to which it is entitled to under the statute and also blocking its funds affecting its cash flows, merely because of existence of (non functional) alternate forum/remedy on paper, by not invoking the jurisdiction under Article 226 of the Constitution of India. Further, mere existence of alternative remedy is no bar for invoking the jurisdiction under Article 226 of the Constitution of India, when right to carry on business is being impeded, resulting in violation of fundamental right as guaranteed under Article 19(1)(g) of the Constitution of India. The impugned Order-in-Appeal passed by the 4th respondent, cannot be held to be a validly passed order for it to be sustained - Petition allowed. Issues Involved:1. Denial of refund of excess balance in the electronic cash ledger.2. Applicability of the principle of 'unjust enrichment.'3. Interpretation of Section 52 and Section 54 of the CGST Act.4. Maintainability of the writ petition under Article 226 of the Constitution of India.Detailed Analysis:1. Denial of Refund of Excess Balance in the Electronic Cash Ledger:The petitioner, engaged in trading electronic goods via an e-commerce platform, contended that due to large inventory maintenance, there was a high balance of input tax credit (ITC) in their electronic credit ledger. They argued that the excess balance in the electronic cash ledger, accumulated due to tax collected at source (TCS) by the Electronic Commerce Operator (ECO) under Section 52 of the CGST Act, should be refundable under Section 49(6) read with Section 54 of the CGST Act. The 4th respondent had set aside the 5th respondent's order, which had initially sanctioned the refund, by asserting that there was no provision under Section 54(1) for refund of TCS unless it was erroneously deposited. The court found that the amount collected by the ECO and credited to the petitioner's electronic cash ledger is tax, and the petitioner is entitled to claim a refund of the balance under Section 49(6) and the proviso to Section 54(1).2. Applicability of the Principle of 'Unjust Enrichment':The 3rd respondent had reviewed the initial refund sanction order and observed that the principle of 'unjust enrichment' was not examined. The court noted that the petitioner had provided a CA certificate as required under Rule 89(2)(n) of the CGST Rules, supporting the claim that the incidence of the amount paid and claimed as a refund had not been passed to any other person. The court held that the petitioner was entitled to the refund since the balance in the electronic cash ledger was not utilized and was thus refundable.3. Interpretation of Section 52 and Section 54 of the CGST Act:The court analyzed the relevant provisions of the CGST Act. Section 49(1) allows deposits into the electronic cash ledger by any person, not necessarily the person in whose name the ledger is maintained. Section 52 mandates ECOs to collect and remit a percentage of the net value of taxable supplies to the government, which the supplier can claim as credit in their electronic cash ledger. The court rejected the respondents' argument that the amount collected under Section 52 is not a tax. It held that the amount collected by the ECO and paid to the government is tax, and the petitioner is entitled to claim a refund of the balance in the electronic cash ledger under Section 54(1) and its proviso.4. Maintainability of the Writ Petition under Article 226:The respondents argued that the writ petition was not maintainable due to the availability of an effective remedy of appeal before the Appellate Tribunal under Section 109 of the CGST Act. However, the court noted that the Appellate Tribunal had not been constituted in the State of Telangana, despite more than three years passing since the introduction of GST. The court held that the petitioner could not be compelled to wait indefinitely to agitate its claim for a refund, which affected its cash flows and business operations. Therefore, the court found the writ petition maintainable under Article 226 of the Constitution of India.Conclusion:The court allowed the writ petition, set aside the impugned Order-in-Appeal, and held that the petitioner is entitled to a refund of the balance in the electronic cash ledger as claimed. The court directed the respondents to refund the sum of Rs. 1,17,29,989/- to the petitioner. Pending miscellaneous petitions were closed, and no costs were awarded.