Refund of sum deposited due to ITC discrepancy

[AMIT BATHAM]

Due to an ITC mismatch, one of my clients had to deposit tax via DRC-03 in August 2022 for the tax year 2018–2019. Following this, some suppliers who had not yet filed their GSTR-1 filed, and some suppliers issued certificates in accordance with Circular 183/15/2022 which was issued in Dec. 2022. During the case hearing, the assessing officer accepted the reply and and after giving credit of certificate and GSTR-2A passed a speaking order, stating that the refund requested in the notice's reply would be considered under the GST relevant section in a separate application. In December 2023, the order was passed. In the refund application, the assessing officer sent a notice stating that the applicant had voluntarily deposited tax and tax under section 73(5) via DRC-03, so it was not covered by excess tax payment and went against the legal system as defined by section 54 of the GST. Please advise me

[Padmanathan KV]

Whether officer has issued deficiency memo in RFD-03 or show cause notice in RFD-08?

[Padmanathan KV]

If its deficiency memo, try applying again but this time under "on account of assessment/ prov assessment/appeal.." category while filing RFD-01 online. Also enclose a copy of the assessment order which states the refund application to be filed separately.

If its a show cause notice, give a detailed reply of the facts and also enclose the assessment order along with reply. If it is rejected and order is passed, you can file appeal or even a writ petition before the HC.

I have faced similar situations, when the original assessment order was passed by State Department and the refund was before the Central Department.

[Padmanathan KV]

Pls check the decision of Hon'ble Kerala High Court in Five Star Metals (P) Ltd. vs State Tax Officer & Ors. in WPC 20129 of 2020 dtd. 11-08-2023  wherein the Court has directed refund along with interest on ITC wrongly reversed by them. This squarely covers your issue.

[AMIT BATHAM]

Thank u very much 

[Shilpi Jain]

Officers always find innovative ways to deny eligible benefits to the taxpayers.

File an appeal

[KALLESHAMURTHY MURTHY K.N.]

Dear Sir, 

Payment of tax u/s 73(5) cannot be treated as voluntary payment in every situation. Payment of tax u/s 73(5) may be made on the ascertainment by the proper officer.  As per Sec. 17(5)(i) any tax paid in accordance with the provisions of Sec. 74, 129 and 130 only ITC is not eligible to avail.  There is no restriction to reject the ITC on account of voluntary payment of tax. 

[KASTURI SETHI]

If the facts disclosed in the query are  correct and complete, the Adjudication Order passed is not legally correct. Excess payment of tax can be by so many reasons. Suppose the excess payment  was  made voluntarily, even then it is not out of  the term, "excess payment'. A serious legal infirmity indeed.  Once the order is passed, filing an appeal is the only remedy. No chance  for rectification in this scenario. 

AI Summary

Excess tax payment refund: challenge where DRC-03 deposit after ITC mismatch is treated as voluntary payment.
Taxpayer paid tax via DRC-03 to correct an ITC mismatch; the assessing officer accepted facts in assessment but in the refund proceeding treated the DRC-03 deposit as a voluntary payment not constituting excess tax eligible for refund under the statutory refund mechanism. The practical remedies are to check whether a deficiency memo or show-cause notice was issued, refile RFD-01 under the assessment-related category with the assessment order, or respond to a show-cause and, if rejected, pursue appeal or writ remedies; similar judicial decisions have ordered refunds.