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

Input Tax Credit re availment under Rule 37A allowed, while recovery of interest and penalty remains legally contestable, may require litigation. The proviso to Rule 37A allows re availment of input tax credit in Form GSTR 3B when a supplier files returns after the annual cutoff, but it does not address re crediting of interest and penalty; interest is argued to be compensatory and not recoverable twice, while penalty liability depends on the specific legal provision and may be contested. Remedies include filing a refund application for amounts paid and seeking writ relief where necessary, with outcomes dependent on factual and procedural circumstances surrounding the original payments.