Unutilised ITC refund claims for exports: dispute over calendar-month filing restriction; rejection quashed and remanded u/s54

The dominant issue was whether rejection of a refund claim for unutilised ITC on the ground that it must relate to a specific calendar month was legally sustainable. The HC held that the claim was within the statutory limitation under s.54 CGST Act, and that the appellate authority's calendar-month restriction was contrary to the Act, r.89 and Circular No.37; consequently, the impugned order was quashed. On the issue of substantive entitlement to refund, the HC held that eligibility must be determined on scrutiny of export and ITC records under the statutory scheme, which could not be conclusively undertaken in writ jurisdiction; accordingly, the matter was remanded to the proper authority for fresh determination.

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Issues:
The judgment involves the refusal of a refund claim by the petitioner in relation to unutilised Input Tax Credit (ITC) under the Integrated Goods and Services Tax Act, 2017 (IGST Act) and Central Goods and Services Tax Act, 2017 (CGST Act).

Issue 1: Refund Claim and Calculation Methodology
The petitioner, an exporter of processed tea, availed ITC for tea procurement and claimed a refund for the period from July 2017 to November 2017. The petitioner's refund calculation was based on ITC attributable to exports made monthly, resulting in a lower refund claim. Additional refund claims for May 2018 and July 2017 to November 2017 were rejected. The appellate authority affirmed the rejection, leading to the current writ petition challenging the appellate order.

Issue 2: Statutory Provisions and Circular Interpretation
The petitioner argued that the refund claim was made within the two-year period as per Section 54 of the CGST Act, computed from the date of export. Citing Circular No.37/11/2018-GST, the petitioner contended that clubbing refund claims for multiple months is permissible, contrary to the appellate authority's decision. The petitioner relied on a Delhi High Court judgment to support the claim that refund claims can span multiple financial years.

Issue 3: Entitlement to Refund and Assessment
The Senior Standing Counsel opposed the petitioner's claim, asserting that the refund claim for June 2018 was accepted but rejected for earlier periods. The counsel argued that claims spanning multiple financial years are impermissible. The entitlement to refund, according to the counsel, requires factual assessment beyond the scope of the current proceedings.

The Court noted that the refund application was made within the prescribed two-year period from the relevant export date. Circular No.37 allows clubbing of refund claims for multiple months, and the restriction on claims spanning financial years was invalidated by a Delhi High Court decision. The appellate authority's conclusion that refund claims must be specific to a calendar month was found to be contrary to statutory provisions and the circular. Consequently, the appellate order was quashed, and the matter remanded for the 2nd respondent to reevaluate the refund application considering the observations in the order, with a directive to complete the process within two months.

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