2026 (1) TMI 1062 - HC - GST

Refund on export of goods: rebate only if tax paid; remand for fresh adjudication subject to deposit of disputed amounts

Challenge to refund on export of goods: tax refund as rebate is available only where tax was paid at export, whereas exports without payment of tax permit ... Refund on export of goods - Rejection of Petitioner’s application for rectification of the order - although the Petitioner had failed to respond to the Show Cause Notice, the Petitioner had attempted to have the same rectified by filing an application for rectification u/s 161 of the respective GST Enactments - HELD THAT:- It is inconceivable as to how the amount could have been refunded to the Petitioner on the tax that was payable for the export of goods and services without payment of tax. Only if tax was paid at the time of export, a refund in the form of rebate could have been availed by the Petitioner on such taxes - At best, the Petitioner could have been entitled to avail refund of Input Tax Credit on such exports. Thus, the refund orders which have been kept along with the Typed Set of documents appears to be prima-facie irregular and the amount which have been refunded back to the Petitioner ought to have been recovered. Considering the fact that the Petitioner have also not responded to the Show Cause Notice in DRC-01 that preceded the impugned order, the impugned order is quashed and the case is remitted back to the Respondent to pass a fresh order on merits, subject to the Petitioner depositing the entire amount of disputed tax covered by the impugned order and also the refund remitted vide two refund orders for the exports made during the month of December 2017- 2018 and January 2018-2019 in cash from the Petitioner's Electronic Cash Register within a period of thirty days from the date of receipt of a copy of this order. Petition disposed off by way of remand. Issues: (i) Whether the impugned assessment order dated 16.11.2023 and the rectification rejection dated 03.06.2024 are liable to be quashed and the matter remitted for fresh decision where the assessee failed to reply to the show-cause notice but refunds were earlier granted for exports.Analysis: The Court examined the sequence of proceedings including the show-cause notice in DRC-01 dated 08.09.2023, the assessee's non-response, the assessment order dated 16.11.2023, the rectification application under Section 161 and its rejection dated 03.06.2024, and the refund orders issued in respect of exports. The Court observed a prima facie irregularity in the refund orders since refunds of tax could not have been legitimately issued where tax for zero-rated exports without payment was claimed as rebate; at best input tax credit would have been available. In view of these facts and the assessee's failure to have earlier replied to the show-cause notice, the Court considered it appropriate to set aside the impugned order and remit the matter for fresh adjudication subject to stipulated conditions including deposit of disputed tax and the refunded amounts and filing of a reply to the show-cause notice.Conclusion: Issue (i): Partly in favour of the Assessee; the impugned assessment order dated 16.11.2023 and the rectification rejection dated 03.06.2024 are quashed and the matter is remitted for fresh adjudication on merits subject to the assessee depositing the disputed tax and refund amounts and filing a reply to the show-cause notice.