HC orders IGST refund with 6% interest due to GSTN software errors, emphasizing shipping bills as deemed refund claims

The HC allowed the refund of IGST with 6% interest, recognizing that delays and difficulties arose from GSTN software errors rather than any fault of the petitioner or tax officers. The court emphasized that shipping bills serve as deemed refund applications and that the automatic refund process depends heavily on accurate data matching by GSTN. It held that GSTN must address system shortcomings promptly to prevent recurring issues and recommended direct, response-based communication between authorities and GSTN on the portal. The refund claim was upheld due to the absence of dispute and prior partial refunds credited to the petitioner's account.

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Issues Involved:
1. Non-issuance of refund of Integrated Goods and Services Tax (IGST) along with interest.
2. Automatic processing and validation of refund claims by the Indian Customs EDI System (ICES).
3. Mismatch in petitioner's firm name causing refund processing issues.
4. Legal provisions under Sections 16 and 54 of the IGST Act and Rule 96 of the CGST Rules.
5. System-driven vs. officer-driven refund process.
6. Recommendations for system improvements and direct communication with GSTN.

Issue-wise Detailed Analysis:

1. Non-issuance of refund of Integrated Goods and Services Tax (IGST) along with interest:
The petitioner, a Limited Liability Partnership Firm, sought a refund of IGST paid on export invoice No. E54/2019-20 dated 06.02.2020 amounting to Rs. 19,94,994/-. Despite receiving refunds for other invoices, this particular refund was not processed. The petitioner approached the Department of Administrative Reforms and Public Grievance (CPGRAMS) but received no response for two months, leading to the filing of this petition.

2. Automatic processing and validation of refund claims by the Indian Customs EDI System (ICES):
The respondent explained that the processing of refund claims is an automatic process managed by ICES, which validates shipping bill data against GST returns data. Successful validation leads to electronic crediting of the refund amount to the petitioner's bank account as per Rule 96 of the CGST Rules, 2017. However, the refund for the shipping bill in question showed a status of "Permanent Cancellation by PAO for transaction" due to a mismatch in the petitioner's firm name, which caused the refund to be rejected by HDFC Bank.

3. Mismatch in petitioner's firm name causing refund processing issues:
The refund issue arose due to a mismatch in the petitioner's firm name, which had been updated from Azuvi International LLP to Aartos International LLP in April 2019. Despite updating all relevant departments, the refund for the specific invoice was not processed, although refunds for other invoices during the same period were successfully credited.

4. Legal provisions under Sections 16 and 54 of the IGST Act and Rule 96 of the CGST Rules:
The petitioner argued that under Sections 16 and 54 of the IGST Act and Rule 96 of the CGST Rules, the refund amount was due. Section 54(6) of the CGST Act mandates that 90% of the refund amount claimed in Form RFD-04 should be sanctioned within seven days from the date of acknowledgment. The shipping bills are deemed to be refund applications when goods are exported with payment of tax.

5. System-driven vs. officer-driven refund process:
The court observed that the system-driven process, while efficient, had limitations due to software issues. The automatic grant of refunds relies on the validation of shipping bill data against GST returns data. Any mismatch or error in the software needs to be addressed by the GST Network (GSTN). The court highlighted the need for vigilance and rectification of software shortcomings to prevent such issues from recurring.

6. Recommendations for system improvements and direct communication with GSTN:
The court recommended that the GSTN should have a direct communication feature on the portal, such as a "MAY I HELP YOU" or "Grievance Redressal Mechanism" to facilitate direct communication between the Assessee and GSTN. This would reduce the need for court intervention and address system limitations more effectively.

Conclusion:
The petition was allowed, and the court directed the respondent to refund the IGST amount of Rs. 19,94,994/- with interest at 6% per annum within two weeks from the date of receipt of the order. The court also permitted direct service through e-mode on the official email address.

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