2021 (11) TMI 973 - HC - GST

Court sets aside orders for lack of reasons on refund rejections under Central Goods and Services Tax Act.

The court set aside the impugned orders due to the absence of recorded reasons for rejecting refund applications under the Central Goods and Services Tax ... Refund under Section 54 of the Central Goods and Services Tax Act - requirement to record reasons in writing under Rule 92(3) of the Central Goods and Services Tax Rules - extension of limitation by suo motu order of the Supreme Court in view of COVID-19 - exclusion/computation of limitation period on account of COVID 19 orders - quasi judicial powers of tax authorities to hear and dispose proceedings - de novo consideration on remandExtension of limitation by suo motu order of the Supreme Court in view of COVID-19 - exclusion/computation of limitation period on account of COVID 19 orders - quasi judicial powers of tax authorities to hear and dispose proceedings - Application of the Supreme Court's suo motu extension of limitation to the refund applications under the CGST Act - HELD THAT: - The Court held that the Supreme Court's suo motu orders extending and excluding limitation periods on account of COVID 19 apply to the refund applications in the present proceedings. The Central Board of Indirect Taxes' Circular No.157/13/2021-GST (paragraph 4(b)) confirms that quasi judicial proceedings by tax authorities, including disposal of refund applications, may continue and will be governed by the extensions. Consequently, the observations in the impugned orders that the refund applications were time barred under the two year limitation are set aside to the extent they proceeded without applying the benefit of the COVID 19 limitation orders. [Paras 9, 10]Benefit of the Supreme Court's extension/exclusion of limitation on account of COVID 19 applies to the refund applications; the impugned orders' conclusion of time bar is set aside insofar as it failed to apply that extension.Requirement to record reasons in writing under Rule 92(3) of the Central Goods and Services Tax Rules - refund under Section 54 of the Central Goods and Services Tax Act - Whether the impugned orders complied with Rule 92(3) by recording reasons in writing when rejecting the refund claims - HELD THAT: - The Court found that the impugned orders stated that the refund applications were 'examined' and concluded they were beyond two years, but did not record reasons in writing as mandated by Rule 92(3). Because the statutory requirement to record reasons is integral to the validity of an order rejecting refund, the Court refrained from expressing any view on entitlement under Section 54(8)(b) and held that absence of written reasons rendered the impugned orders unsustainable. [Paras 7, 11, 13]Impugned orders are set aside solely because they do not contain reasons in writing as required by Rule 92(3).De novo consideration on remand - refund under Section 54 of the Central Goods and Services Tax Act - requirement to record reasons in writing under Rule 92(3) of the Central Goods and Services Tax Rules - Remedy and directions to the tax authority following the defects in the impugned orders - HELD THAT: - In view of the application of the Supreme Court's limitation orders and the failure to record reasons, the Court directed that the impugned orders be set aside and the respondent shall examine the refund applications afresh. The fresh exercise must be undertaken in accordance with Section 54 of the CGST Act and Rule 92 of the Rules, with reasons recorded in writing where a refund (in whole or in part) is found inadmissible. The respondent was directed to complete the de novo consideration expeditiously, within a specified period. [Paras 15]Matter remitted for de novo consideration under Section 54 and Rule 92; respondent to decide afresh and record reasons in writing, within six weeks.Final Conclusion: The impugned refund orders are set aside: the Court applied the Supreme Court's COVID 19 limitation extension to these refund claims and found the impugned orders deficient for want of reasons under Rule 92(3); the matters are remitted for fresh adjudication in accordance with Section 54 of the CGST Act and Rule 92 of the Rules, to be completed within six weeks, and the writ petitions are disposed of with no order as to costs. Issues involved:Refund under the Central Goods and Services Tax Act, 2017; Interpretation of the expression 'relevant date' in light of the Central Goods and Services Tax (Amendment) Act, 2018; Benefit of suo-moto orders of the Hon'ble Supreme Court regarding extension of limitation periods due to Covid-19 situation; Examination of refund applications; Compliance with Rule 92(3) of the Central Goods and Services Tax Rules, 2017.Analysis:1. Refund under the Central Goods and Services Tax Act, 2017:The judgment pertains to refund applications made under Section 54 of the Central Goods and Services Tax Act, 2017. The refund applications in question sought refunds for transactions in June 2018 and August 2018. The impugned orders rejected the refund applications on the grounds that they were made beyond the two-year period from the relevant date. However, the petitioner argued that the benefit of the suo-moto orders of the Hon'ble Supreme Court, extending limitation periods due to the Covid-19 situation, should apply to their case, thereby allowing the refund applications to be entertained.2. Interpretation of the expression 'relevant date' in light of the Central Goods and Services Tax (Amendment) Act, 2018:The critical issue discussed was the interpretation of the expression 'relevant date' in the context of the Central Goods and Services Tax (Amendment) Act, 2018. The petitioner's counsel contended that due to the suo-moto orders of the Hon'ble Supreme Court extending limitation periods, the specific interpretation of 'relevant date' under the Amendment Act might not be necessary in this case. This argument was based on the broader extension of limitation periods granted by the Supreme Court.3. Benefit of suo-moto orders of the Hon'ble Supreme Court regarding extension of limitation periods due to Covid-19 situation:The petitioner relied on the suo-moto orders of the Hon'ble Supreme Court, which extended limitation periods for various legal proceedings due to the Covid-19 pandemic. The petitioner argued that these orders should apply to their refund applications, even if it meant not delving into the specific interpretation of the 'relevant date' under the Amendment Act. The judgment considered the applicability of these orders in the context of the refund applications made by the petitioner.4. Examination of refund applications:Another significant aspect of the judgment was the examination of the refund applications by the tax authorities. The impugned orders had examined the applications but failed to provide reasons for the rejection of the refunds as required under Rule 92(3) of the Central Goods and Services Tax Rules, 2017. The court highlighted this deficiency and emphasized the importance of recording reasons for rejecting refund claims, ensuring compliance with the procedural requirements.5. Compliance with Rule 92(3) of the Central Goods and Services Tax Rules, 2017:The judgment underscored the necessity of complying with Rule 92(3) of the Central Goods and Services Tax Rules, 2017, which mandates that the proper officer must record reasons in writing if any part of the claimed refund is not admissible or payable. The court noted the absence of such recorded reasons in the impugned orders and directed the tax authorities to reconsider the refund applications de novo, ensuring adherence to the procedural requirements and statutory provisions.In conclusion, the judgment set aside the impugned orders due to the lack of recorded reasons for rejection and directed the tax authorities to reexamine the refund applications in accordance with the Central Goods and Services Tax Act and Rules, emphasizing the importance of providing detailed reasons for any decision on refund claims.