Unjustenrichment - Issue of Credit Note

[LALIT MUNOYAT]

Can a supplier issue a Credit Not to its recipient for GST collected in excess, on downward revision of the price after the supply was made. The original invoice to which the CN is mapped shows GST collected on the Full value calculated at the original rate. This will reduce the output liability of the Supplier. IS such a CN equal to to the Refund as envisaged in the ACT.

[YAGAY andSUN]

In our view if your customer reverse the ITC then you will be able to get the refund otherwise not.

[Nitika Aggarwal]

Dear sir,

As per Section 34 of CGST Act, 2017 Credit note shall be issued only in the following cases:-

a) Tax Invoice has been issued and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or

b) where the goods supplied are returned by the recipient, or

c) where goods or services or both supplied are found to be deficient.

Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person.

If the your case falls under any of the above mentioned cases, then only you are eligible to issue credit note.

Regards

Nitika Aggarwal

9953157961

[CSSANJAY MALHOTRA]

Very concise and brief reply by Yagay and Sun. Agreed.

[YAGAY andSUN]

Thanks Sanjay Sir.

[LALIT MUNOYAT]

The issue has different connotations under different circumstances. However the rule that has been determined by the SC is being consistently followed by the lower authorities. The decision depends upon whether the discount given was known at the time of Sale or not. The following judgment clears the situation:

2018 (2) TMI 1105 - CESTAT MUMBAI

MAHANAGAR GAS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI

Refund claim - trade discount - price variation clause - Held that: - the trade discount was not known to prior to the clearance and thus at the time of clearance, the assessable value can only be ascertained on the basis of trade discount which was known to the buyer - Variation on the transaction value on a subsequent date cannot result in re-determination of assessable value - refund cannot be allowed - appeal dismissed - decided against appellant.

Dated.- December 28, 2017

2011 (3) TMI 1443 - KARNATAKA HIGH COURT

SUDHIR PAPERS LTD. VERSUS COMMISSIONER OF C. EX., BANGALORE-I

We find that the factual position is as to whether the cash discounts, quantity discounts, and other trade discounts, whose deduction is sought from the assessable value, and on the basis of which the refund of duty has been claimed, were known at the time of removal or not,. If the discounts in question were known and understood at the time of removal in form of price circulars, price lists, discount policy, circulated among the dealers their deduction from the assessable value would have to be allowed in view the Apex Courts judgment in the Apex Court in the case of Union of India Vs. M/s. Madras Rubber Factory [ 1986 (12) TMI 35 - SUPREME COURT OF INDIA ] (supra) even if the same were quantified, subsequently, subject to the conditions that the same had actually been passed on to the buyers. If the discounts, in question, are deductible from the assessable value, the respondent would be eligible for refund subject to the provisions of Section 11b of the Central Excise Act, 1944i.e. and being not hit by the principle of unjust enrichment.

March 28, 2011

[LALIT MUNOYAT]

However even if the refund is determined as payable in view of the judgment of the Karnataka High Court (,i.e the discount was given on the basis of which the refund of duty has been claimed, were known at the time of sales), still the supplier will have to prove that he has not passed on the incidence of the tax on to any other person. If he is not able to prove this then the refund so determined will not be paid to him but instead credited to the Consumer Welfare Fund to be used for the betterment of the consumers who must have utlimately born the incidence of tax.

AI Summary

Credit note issuance for excess GST requires statutory grounds and may not substitute for refund where tax incidence was passed on. A supplier may issue a credit note to correct excess GST charged only where the invoice overstated taxable value or tax, goods are returned, or supplies are deficient, and not if the tax incidence has been passed to another person. Receipt of a refund or reduction in supplier output tax may also require the recipient to reverse input tax credit. Known trade discounts at time of supply can support re determination of assessable value, whereas post transaction price variations typically cannot. If tax has been passed on, any refund may instead be diverted to a consumer welfare fund under the unjust enrichment principle.