Refund claim rejection overturned as manual filing allowed under Rule 97A despite electronic filing mandate

The Bombay HC allowed the petition challenging rejection of a refund claim under Section 54 of the CGST Act. The respondent rejected the application solely because it was not filed electronically as per a November 2019 circular, despite electronic filing being mandatory from September 2019. Following the precedent in Laxmi Organic Industries Ltd. v. Union of India, the court held that Rule 97A permits manual filing of refund applications even when electronic filing is prescribed. The court ruled that the circular applies only to electronically filed applications and cannot override statutory provisions allowing manual filing, thereby quashing the rejection order.

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Issues:
Challenge to rejection of refund application due to non-electronic filing under GST rules.

Analysis:
The petitioner challenged the rejection of their refund application under Article 226 of the Constitution of India. The respondent rejected the application on the grounds that it was not filed electronically as mandated by Circular No. 125/44/2019-GST. The petitioner had entered into an Agreement for Sale with Respondent No.5, who paid GST of Rs. 18,26,412. Despite the agreement being terminated, no Deed of Cancellation was executed. The petitioner applied for a refund on 4th September 2020, but it was rejected on 18th February 2021 for not being filed electronically. The petitioner sought a writ of certiorari to quash the rejection and a mandamus to process the refund application.

The respondent Nos.1 to 4 opposed the writ petition, stating that the Respondent No.5 had shared a draft Deed of Cancellation, but the petitioner did not proceed with its execution and registration. The petitioner argued that since the Respondent No.5 collected GST from them and did not claim a refund, they were entitled to claim the refund under Section 54 of the CGST Act. The petitioner relied on Rule 89 of the CGST Rules 2017, stating that the tax amount recovered from them by Respondent No.5 should entitle them to claim a refund as the ultimate consumer.

The petitioner also cited Rule 97A of the CGST Rules, arguing that the reference to electronic filing should include manual filing. A previous judgment was referenced, highlighting that manual filing should be allowed despite the Circular mandating electronic filing. The court noted that the rejection was solely based on non-electronic filing and did not address the petitioner's eligibility for a refund. Referring to a previous judgment, the court held that the Circular should not bar manual refund applications, especially when the petitioner was not registered under the CGST Act for electronic filing.

In conclusion, the court quashed the rejection order, restored the application, and directed the respondent to consider it without influence from the previous order. The court kept the issue of the petitioner's eligibility for a refund open. The respondent was instructed to decide on the refund application within eight weeks, release the refund amount if approved, and allow the petitioner to take appropriate action if rejected. The writ petition was allowed, and the rule was made absolute, with no costs awarded to any party.

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