2022 (2) TMI 847 - HC - GST

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 ... Rejection of refund claim - application filed by the Petitioner rejected on the ground that the refund claim application was not filed electronically, which was mandatory with effect from 26th September 2019 - HELD THAT:- A perusal of the Order passed by the Respondent No.3 indicates that the Respondent No.3 has not rejected the said application for refund filed by the Petitioner under Section 54 of the said C.G.S.T. Act on the ground that the Petitioner is not entitled to apply for refund under any of the provisions of the said C.G.S.T. Act or the applicable Rules. The said Order dated 18th February 2021 indicates that the application for refund is rejected only on the ground that the said refund claim application is not filed electronically and in accordance with Circular dated 18th November 2019 issued by the Government of India. A Division Bench of this Court in the case of LAXMI ORGANIC INDUSTRIES LTD. VERSUS UNION OF INDIA AND ORS. [2021 (12) TMI 63 - BOMBAY HIGH COURT] has dealt with identical facts and after construing Section 168 of the C.G.S.T. Act, Rule 89 and Rule 97A of the C.G.S.T. Rules has held that the plain and simple construction of Rule 97A is that despite Rule 89 providing for electronic filing of applications for refund on the common portal, in respect of any process or procedure prescribed in Chapter X, any reference to electronic filing of application on the common portal shall, in respect of that process or procedure, include manual filing of the said application - This Court rejected the similar stand taken by the learned counsel for Revenue and held that Rule 97A can not be construed in a manner as sought to be canvassed by the learned counsel for Revenue so as to defeat the purpose of Legislation. This Court accordingly held that the impugned Circular would certainly be applicable to all application filed electronically on the common portal but the impugned Circular cannot affect or control the statutory rule i.e. Rule 97A of the C.G.S.T. Rules or derogate from it. This Court accordingly quashed and the impugned Order therein is set aside and it is clarified that the said Circular shall be applicable only to applications filed electronically on the common portal but would have no applicability to an application for refund which is filed manually - petition allowed. 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.