Applicability of circular 135/05/2020 for refund period prior to Oct-2019

[NRSR CO]

Hi,

We have applied for the GST refund in case of export without payment of tax for the month of Septemeber 2019 in April 2020. Since the period is prior to 36(4) applicablity, we have claimed the refund of few invoice not appearing GSTR-2A. After the application many supplier filed the GSTR-1 and many of the invoices are now appearing in GSTR 2A. Now department sent SCN asking to repay the refund on erroneous refund basis. When rule 36(4) it self is not applicable for the period under question for availament, can the circular 135/05/2020 insist the GSTR-2A requirement for the invoices to claim refund?

[Shilpi Jain]

Anytime until 01.01.2022, the rule 36(4) cannot be implemented. Also we need to check if this condition in section 16(2) is to be complied before taking credit or can be satisfied even after?

The requirement for the department or the government is that the money should reach their kitty before anyone takes credit. So this should be a condition allowed to be satisfied even post availing of credit.

[Ganeshan Kalyani]

Dept may go by GSTR-2A as it is the only method for them to verify if the credit or refund may be allowed. However, taxpayer need to justify that credit should be allowed as he satisfy conditions of sec.16.

[Amit Agrawal]

Circular No.135/05/2020 - GST dated 31.03.2020 was issued by CBIC in exercise of its powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017 and thereby, these are binding instructions which Dept's officer has to follow.

However, in Para 5 of said circular, it is clearly seen that CBIC has changed its policy (i.e. to grant refund only against ITC whose invoices are reflected in GSTR-2A) due to insertion of sub-rule (4) to rule 36 of the CGST Rules, 2017 vide notification No. 49/2019-GST dated 09.10.2019.

As querist has clarified that subject refund-claim was for Sept, 2019, one can argue that changes brought vide Circular No.135/05/2020 - GST dated 31.03.2020 cannot be applied to subject refund-claim. (However, Dept. may claim / argue that date of taking ITC is actual date of filing of GSTR-3B for Sept, 19 ..... another controversy under GST)

But more importantly, Para 5 of said circular clearly overrides relevant legal provisions allowing refund of accumulated ITC. And thereby, it is fit case to challenge said instructions of Para 5 (& SCN so issued) by filing writ petition in jurisdictional high Court.

It is ironical that in Para 2.2 of very same circular, CBIC notes that 'Hon’ble Delhi High Court vide para 12 of the aforesaid Order has observed that the Circulars can supplant but not supplement the law. Circulars might mitigate rigours of law by granting administrative relief beyond relevant provisions of the statute, however, Central Government is not empowered to withdraw benefits or impose stricter conditions than postulated by the law' and then CBICgoes on given more instructions to its officers in Para 5 which are nothing but withdrawing benefits or imposing stricter conditions than postulated by the law'.

From query, it seems that Dept. is seeking only recovery of refund already granted but not sought denial of ITC. Unless ITC itself is denied, refund thereto cannot be denied in given situation under discussion. And this fact will make 'grounds to be taken in suggested writ petition' more forceful.

Al above are strictly my personal views and same should not be taken as professional advice / suggestion.

[NRSR CO]

Amith Sir, Your reply is more relavent. The same issue what you have expressed in your comment is the real worry for many assessee. Dept is insisting to follow Circular 135 which is beyond the law of land.

AI Summary

Company Challenges GST Refund Repayment Notice; Argues Circular 135/05/2020 Shouldn't Apply Retroactively to 2019 Claims A company applied for a GST refund for September 2019, claiming invoices not listed in GSTR-2A, as rule 36(4) was not applicable then. After suppliers filed GSTR-1, these invoices appeared in GSTR-2A. The department issued a show cause notice (SCN) for refund repayment, citing Circular 135/05/2020, which mandates GSTR-2A reflection for refunds. Respondents argue that the circular's requirements shouldn't apply retroactively to September 2019 claims and suggest challenging the SCN through a writ petition, as the circular imposes stricter conditions than the law allows. The issue highlights concerns about departmental insistence on following the circular.