2023 (7) TMI 938 - HC - GST

Refund claim for unutilized ITC in zero-rated supplies must be considered despite technical filing errors under Clause 7(c)

Messrs Shree Renuka Sugars Ltd. Versus State Of Gujarat

The HC held that the petitioner's refund claim for unutilized ITC used in zero-rated supplies, initially filed under Clause 7(c), could not be rejected ... Refund claim of unutilized ITC used in making zero-rated supply of goods - Technical error - It is the case of the petitioner that while showing the category of refund application, the petitioner has shown “any other” as the category because refund applications for these 11 months had already been made under Clause 7(c) - HELD THAT:- As the petitioner already filed refund application under Clause 7(c) i.e. accumulated ITC category at first point of time, for the same month and same period, another/supplementary application for the refund of the differential amount of refund (not claimed by the petitioner on account of arithmetical error on the part of the petitioner) cannot be filed on the portal and therefore there was no option for the petitioner to submit the application under the category “any other”. Thus, this is nothing but technical error and for such technical error, the claim of the petitioner cannot be rejected without examining the same by the respondent authority on its own merits and in accordance with law. Reference made to the decision rendered by the Hon’ble Supreme Court in the case of UNION OF INDIA & ORS. VERSUS VKC FOOTSTEPS INDIA PVT LTD. [2021 (9) TMI 626 - SUPREME COURT], wherein the Hon’ble Supreme Court has an occasion to deal with the issue where the High Court has expanded the provision for refund beyond what the legislature has provided, and therefore, the aforesaid decision would not render any assistance to learned AGP in the facts of the present case. It is settled law that the benefit which otherwise a person is entitled to once the substantive conditions are satisfied cannot be denied due to a technical error or lacunae in the electronic system - the petitioner has no option but to upload the supplementary application under “any other” category for the refund of the left out amount, which was due to an arithmetical error committed by the employee of the petitioner - the said claim of the petitioner for refund of the left out amount of Rs. 10,20,28,733/- cannot be rejected outright merely on technicality and that too when the substantive conditions are satisfied without scrutiny by the respondent in accordance with law. Thus, the petition deserves to be allowed - the respondents are directed to allow the petitioner to furnish manually the refund applications for refund of the left out amount of Rs. 10,20,28,733/- - Petition allowed. Issues Involved:1. Entitlement to Refund of Unutilized ITC.2. Technical Error in Refund Claims Submission.3. Legal Provisions Governing Refunds.4. Judicial Precedents and Their Applicability.Summary:1. Entitlement to Refund of Unutilized ITC:The petitioner, engaged in the sugar industry, sought a refund of unutilized Input Tax Credit (ITC) for zero-rated supplies as per Section 16 of the IGST Act and Section 54(3) of the CGST Act. The petitioner claimed an aggregate refund of Rs. 1,10,67,67,172/- for 11 months during FY 2020-2021 and 2021-2022 but due to an arithmetical error, only Rs. 1,00,47,38,439/- was claimed and sanctioned. The petitioner later filed supplementary claims for the remaining Rs. 10,20,28,733/-, which were rejected by the respondents on the basis that the category under which the supplementary claims were lodged was not applicable.2. Technical Error in Refund Claims Submission:The petitioner claimed that the error was due to an inadvertent arithmetical mistake by an employee. Upon realizing the error, supplementary refund claims were filed under the 'any other' category since the portal did not allow multiple claims under the same category for the same period. The respondents rejected these supplementary claims without giving an opportunity for a hearing, citing procedural grounds.3. Legal Provisions Governing Refunds:The court referred to Sections 54(3) and 16 of the CGST and IGST Acts respectively, and Rule 89(4) of the CGST Rules, which provide the formula for calculating the refund of unutilized ITC. The court noted that the substantive conditions for the refund were met and that the technical error in the category of the refund claim should not lead to outright rejection.4. Judicial Precedents and Their Applicability:The court cited several precedents, including the Supreme Court's decision in VKC Footsteps India Private Ltd., which emphasized that refund is a statutory prescription and the legislature can define the circumstances under which it is granted. The court also referred to decisions in Bombardier Transportation India Pvt. Ltd., Bodal Chemicals Ltd., and Stitchwell Garments, which held that technical glitches should not deny substantive rights.Conclusion:The court allowed the petition, quashed the impugned orders, and directed the respondents to allow the petitioner to furnish the refund applications manually. The respondents were instructed to scrutinize the claims on their merits and make a decision within six weeks. The court emphasized that benefits should not be denied due to technical errors when substantive conditions are satisfied.