2023 (11) TMI 774 - HC - GST

Refund of IGST to DTA supplier to SEZ upheld under Section 16(3)(b); Rule 90(3) limits clarified

HC held that a DTA unit supplying to SEZ is entitled to refund of IGST paid under Section 16(3)(b) of the IGST Act once goods have entered the SEZ and ... Refund of IGST paid on supplies to SEZ units - Zero-rated supply under Section 16(3)(b) of the IGST Act - Requirement of SEZ endorsement as proof of export - Rule 30(4) of SEZ Rules - 45 days endorsement and consequence - Limitation for refund claims under Section 54(1) of the CGST Act - Rule 90(2)/(3) of CGST Rules - scrutiny, acknowledgement and deficiency memo - Directory nature of limitation and duty to assist taxpayers (CBDT guidance)Rule 30(4) of SEZ Rules - 45 days endorsement and consequence - Zero-rated supply under Section 16(3)(b) of the IGST Act - Requirement of SEZ endorsement as proof of export - Whether refund can be denied for delay or perceived inadequacy in SEZ endorsements when IGST was paid and endorsements were ultimately obtained. - HELD THAT: - The court held that where the supplier has paid IGST and the goods have entered the SEZ and an endorsement by the Authorized Officer (AO/SO) has been obtained and furnished for refund, the refund cannot be denied on account of delay in obtaining the endorsement, or on account of technical defects in the endorsement attributable to the AO. Rule 30(4) of the SEZ Rules serves to ensure goods reached the SEZ and to enable raising a demand where no endorsement is forthcoming within 45 days; it does not operate to defeat a bona fide refund claim where tax has been paid and endorsement is eventually produced. The Court noted that endorsements and their date primarily serve as proof of entry into the SEZ and that any delay caused by the AO or any non material irregularity in the form of endorsement are curable and should not prejudice the supplier's substantive right to refund under Section 16(3)(b). The amendment requiring endorsements to state use for authorized operations came into effect prospectively (w.e.f. 01.10.2023) and was not applicable to the supplies in issue. [Paras 14]Findings denying refund on grounds of inordinate delay, inappropriate or incomplete endorsement are set aside and such defects are curable; refund entitlement stands where IGST was paid and endorsement was obtained.Limitation for refund claims under Section 54(1) of the CGST Act - Rule 90(2)/(3) of CGST Rules - scrutiny, acknowledgement and deficiency memo - Directory nature of limitation and duty to assist taxpayers (CBDT guidance) - Whether refund claims were barred by limitation because supporting documents were submitted only at the time of reply/personal hearing. - HELD THAT: - The Court observed that Section 54(1) prescribes a two year period for filing refund applications but treated the time limit as directory in nature. Rule 90(2) obliges the proper officer to scrutinize applications within fifteen days and, where deficiencies exist, Rule 90(3) requires issuance of a deficiency memo to enable rectification. If the officer acknowledges the application as complete, it is incorrect subsequently to treat the claim as time barred on account of belated submission of supporting documents. The Court relied on the duty of administrative officers to assist taxpayers (as reflected in CBDT guidance) and noted that the respondent acted contrary to Rule 90(3) by not issuing deficiency memos. The Court also took note of the notification excluding 01.03.2020 to 28.02.2022 for computation of limitation. On these bases the Court held the respondents' limitation ground unsustainable and set aside the findings rejecting refunds on that ground. [Paras 15]Findings that the refund claims were barred by limitation due to late submission of supporting documents are set aside; the belated production of documents at reply/personal hearing did not defeat claims filed within two years, and deficiency procedure under Rule 90(3) ought to have been followed.Mismatches in Statement-4 and curable defects - Whether mismatch between endorsement dates in invoices and Statement 4 justified rejection where petitioner rectified the defect by filing revised Statement 4. - HELD THAT: - The Court recorded that the discrepancy in endorsement dates for the December 2019 claim was rectified by the petitioner by filing a revised Statement 4 on 28.01.2022 and that the respondent accepted the rectification. The learned Senior Standing Counsel for the Department conceded that the defect was procedural and curable. Accordingly, the mismatch could not sustain denial of refund. [Paras 16]Findings rejecting the refund for mismatch of details are eschewed since the defect was corrected and accepted; refund cannot be denied on that ground.Final Conclusion: Writ petitions allowed; impugned orders of the first and second respondents set aside. The second respondent is directed to process the petitioner's refund applications and issue the refund within 30 days from receipt of a copy of this order; no costs. Issues Involved:1. Inordinate delay in obtaining endorsement, inappropriate endorsement, and endorsement not stating that goods supplied were for authorized operations.2. Rejection of applications on the ground of alleged delay in submitting supporting documents.3. Mismatch of details in the endorsement dates mentioned in invoices and Statement-4.Summary:Issue 1: Inordinate Delay in Obtaining Endorsement, Inappropriate Endorsement, and Endorsement Not Stating Goods Were for Authorized Operations:The petitioner argued that Rule 30(4) of SEZ Rules, 2006, which mandates obtaining endorsement within 45 days from the date of invoice, does not apply to their case as they supplied goods to SEZ units on payment of tax under Section 16(3)(b) of the IGST Act. The court held that once the petitioner has paid IGST and the goods have entered SEZ with endorsement obtained, refund cannot be denied for delay in obtaining endorsements. Moreover, the court noted that the significance of the endorsement is to ensure goods have reached SEZ and tax has been paid. The delay in obtaining the endorsement is not the petitioner's fault but that of the Authorized Officer (AO). The court also noted that the provisions of Section 16 of the IGST Act do not require the endorsement to state that goods are for authorized operations, and this requirement was introduced only prospectively from 01.10.2023. Therefore, the rejection of the refund claim on these grounds was not tenable and was set aside.Issue 2: Rejection of Applications on the Ground of Alleged Delay in Submitting Supporting Documents:The petitioner submitted that Section 54 of the CGST Act prescribes a two-year time limit for filing refund applications, and Rule 90(2) and (3) of CGST Rules require the proper officer to scrutinize the application within 15 days and issue a deficiency memo if documents are missing. The court noted that the petitioner filed the applications within the prescribed time limit and that the respondent-Department issued acknowledgments without pointing out deficiencies. The court held that non-submission of documents at the time of filing the application cannot be deemed a delay, and the delay in obtaining endorsements due to Covid-19 was beyond the petitioner's control. The court also referred to a notification excluding the period from 01.03.2020 to 28.02.2022 for computing the period of limitation for filing refund applications. Therefore, the rejection of the refund claim on the ground of limitation was set aside.Issue 3: Mismatch of Details:The petitioner rectified the mismatch in endorsement dates in the invoices and Statement-4 at the time of filing the reply. The court noted that the respondent-Department accepted the rectified Statement-4. Therefore, the rejection of the refund claim on the ground of mismatch was not sustainable and was set aside.Conclusion:The court found that the respondents committed serious flaws in the decision-making process. Consequently, the impugned orders were set aside, and the second respondent was directed to process the petitioner's refund applications and issue the refund within 30 days. The matter was posted for filing a compliance report on 18.12.2023.