Refund of GST deposited by us due to return filed post annual cut off by supplier

[mehta pradip]

We purchased material from a public limited company in Feb. 2018 & took GST credit .The supplier did not file return from Feb. 2018 onward & also did not pay GST. The Department cancelled supplier's registration after Feb.2018 but gave effect from 1.2.2018 due to non filing of Returns. So we are made to pay GST along with interest & penalty .

Then supplier filed pending Returns along with GST, interest & penalty in Nov. 2022. So GST amount reflected in our GSTR-2B with remark - Return filled post annual cut off. So GST credit was denied to us .

Can we claim refund of GST , interest & penalty as supplier has paid the same !

[Padmanathan KV]

You cannot claim refund of GST, interest & penalty.

Rule 37A has been inserted NOTIFICATION No. 26/2022 – Central Tax dated 26-12-2022:

Your query is directly covered by the proviso to Rule 37A. The proviso clearly states that the registered person can re-avail the credit in Form GSTR-3B. However it is silent on interest and penalty.

In my considerate view, once interest has been collected from the supplier for belated payment of OPT, it cannot be again collected from recipient for reversal of same amount as ITC. After all interest is only compensatory in nature as held by Supreme Court in Pratibha Processors - 1996 (10) TMI 88 - SUPREME COURT. Therefore, Govt cannot be compensated twice, once from supplier and again from recipient.

Regarding penalty, one has to consider under which provision the penalty was imposed. Clearly, in your case there is no wilfull suppresion, misstatement or fraud involved and the same if alleged can be challenged.

The only way to get the relief of interest and penalty would be to file a writ before the High Court

[Padmanathan KV]

please read "refund of GST." instead of "GST, interest and penalty." Interest and penalty can be litigated as explained above

[Amit Agrawal]

Dear Querist,

What do you mean by saying that ''So we are made to pay GST along with interest & penalty"?

No-one can force anyone to pay such amount without following due process under law.

Second, what is procedure followed while paying said GST along with interest & penalty and whether same is done u/s 74 by filing form DRC-03 ? And if yes, whether Form DRC-04 got issued by Dept.?

Lastly, have you given any letter asking for waiver of SCN by paying u/s 74 (5) etc.?

Kindly elaborate various factual aspects, some of which are listed above.

[Shilpi Jain]

Do file a refund application to claim back the amount paid to department as department cannot be benefited twice. There were also HC decisions which stated that primary liability is on the supplier and protective liabiltiy on the recipient.

Once supplier has paid, there is no reason for department to keep amount received from recipient.

If the order is adverse then file a Writ in the HC.

AI Summary

Company Denied GST Credit Despite Supplier's Compliance; Rule 37A Re-Availment Possible, Legal Action Suggested for Interest Issues. A company faced issues with GST credit denial after their supplier's registration was canceled due to non-filing of returns. The supplier later filed the returns and paid GST, interest, and penalty, but the company was still denied credit. A response indicated that under Rule 37A, while GST credit can be re-availed, interest and penalty issues might require litigation. Another response questioned the payment process and suggested ensuring proper legal procedures were followed. It was advised to file a refund application, as the department should not benefit twice, and to consider a writ in the High Court if necessary.