Can a State Tax Officer question IGST refund on payment of tax issued by the Customs?

[Rohit Gupta]

In my case, the State Tax Officer neither issued a draft audit report nor FAR. The STO issued SCN under Section 73 by attaching FAR to it. In the FAR, the STO has mentioned that he needs to verify whether the gadgets were activated inside India or outside (purely a drawback issue which does not fall under State Jurisdiction). Neither the said query was put by way of an audit objection nor any explanation was sought in any manner. Moreover there are 6-7 other observations which were never put to the assessee. The assessee has submitted the shipping bills, shed report, BRC and details of IGST refund.

Can the said officer question the exports?

Can a SCN be issued on the basis of audit under Section 65 without issuing draft audit report or final audit report?

[KASTURI SETHI]

Dear Querist,

It is beyond jurisdiction on the part of the State Tax Authorities. Such action is not valid. Reply to the second question is 'yes'. A SCN is an opportunity to defend. You can rely on the following judgements on the issue of "the State Tax Authority has initiated proceedings without jurisdiction". 

2024 (3) TMI 1216 - MADRAS HIGH COURT TVL. VARDHAN INFRASTRUCTURE Versus SPECIAL SECRETARY, HEAD OF THE GST COUNCIL SECRETARIAT, NEW DELHI

 

[KASTURI SETHI]

2024 (4) TMI 656 - MADRAS HIGH COURT - RAM AGENCIES Versus ASSISTANT COMMISSIONER OF CENTRAL TAX, THANJAVUR

 

 

 

[KASTURI SETHI]

2024 (6) TMI 1311 - MADRAS HIGH COURT - JOHN BUILDWELL INDIA PVT. LTD. Versus JOINT COMMISSIONER OF CENTRAL GST AND CENTRAL EXCISE, TIRUNELVELI

 

[VENU K]

A show cause notice should be the end of the investigation. A Sec 73 Notice should be issued when the Department has positive evidence of erroneous refund and not on the basis of a suspicion about erroneous refund in my opinion.

[Shilpi Jain]

A SCN cannot be issued on presumptions and assumptions.

[Manoj Thakur]

state GST now after IGST? Interesting.

AI Summary

Jurisdiction over IGST refunds: state officers lack authority to challenge customs-issued refunds; SCNs require positive evidence. A State officer's challenge to a customs-issued IGST refund via a show cause notice attaching a Final Audit Report without a draft audit report raises jurisdictional and procedural infirmities. The core operative point is that SCNs should be based on positive evidence of an erroneous refund and not mere suspicion or uncommunicated audit observations; while a SCN provides an opportunity to defend, initiation without proper audit procedure and where the issue is within customs' domain implicates lack of state authority.