2023 (12) TMI 1101 - HC - GST

Tax Refund Victory: GST Act Interpretation Limits Excessive Security Demands and Protects Taxpayer Rights

M/s. Raj Kamal Cargo Movers Versus The Assistant Commissioner, State Tax Department, The Chief Commissioner, State Tax Department.

The HC examined a tax refund dispute involving GST Act interpretation. The court ruled in favor of the petitioner, quashing the demand for a bank ... Seeking refund claim - petitioner submitted the requisite for complying with the directions of furnishing the solvent security and requested the respondent No. 1 to refund the amount with up-to-date interest - HELD THAT:- The order passed by the appellate authority while rejecting the prayer of the respondent on an application filed under Section 54 (11) of the Act, 2017 was very clear and specifically required the proper officer to process the application of refund as per the provisions of Act/Rules provided the petitioner furnishes the solvent security as per his satisfaction. It appears that the respondent No. 1, who had passed the original order, which came to be set aside by the appellate authority and ordered for refund so made, has been trying to somehow block the refund to be made to the petitioner. Initially, he moved an application under Section 54 (11) of the Act, 2017 which came to be rejected by the authority and direction was given to the petitioner to provide solvent security. Once solvent security was produced by the petitioner, the respondent No. 1 again, apparently not willing to refund the amount, has demanded bank guarantee from the petitioner. The solvent security is that of a person who is entitled to/recipient of the amount. Whereas, the ‘bank guarantee’ is a guarantee given by the bank on behalf of the applicant to cover the payment obligation to a third party. As such, it cannot be said that the demand of bank guarantee by respondent No. 1 could be equated with providing solvent security in terms of the order passed under Section 54 (11) of the Act, 2017. The action of respondent No. 1 in seeking bank guarantee from the petitioner is ex facie contrary to the directions of respondent no. 2 and, therefore, the same cannot be sustained - Petition allowed. Issues Involved:The issues involved in the judgment are the demand for refund, withholding of refund, requirement of furnishing bank guarantee, and interpretation of Section 54(11) of the Rajasthan Goods & Services Tax Act, 2017.Demand for Refund:The petitioner filed a writ petition seeking direction for the respondent No. 1 to issue the refund due to it. Orders creating a demand were passed by the Assistant Commissioner, which were later set aside, and the refund was ordered to be processed as per law.Withholding of Refund:The respondent No. 1 referred the matter to withhold the refund under Section 54(11) of the Act, 2017. The respondent No. 2 concluded that there were no reasonable grounds for withholding the refund and directed the proper officer to process the refund application, subject to the petitioner furnishing solvent security.Requirement of Furnishing Bank Guarantee:The respondent No. 1 ordered the petitioner to furnish a bank guarantee as a form of solvent security before allowing the refund, which the petitioner contested. The petitioner complied with the requirement of furnishing solvent security but objected to the demand for a bank guarantee, considering it beyond the scope of the Act.Interpretation of Section 54(11) of the Act:The petitioner argued that the demand for a bank guarantee was not justified under Section 54(11) of the Act, as the original order required solvent security. The court found the demand for a bank guarantee to be contrary to the directions given by the appellate authority and ruled in favor of the petitioner.Conclusion:The court allowed the writ petition, quashed the order seeking a bank guarantee, and directed the respondent No. 1 to comply with the directions of the appellate authority and Chief Commissioner within two weeks from the date of the order.