2022 (12) TMI 1026

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... as the said order allowed refund to the petitioner after debiting the Integrated Goods and Services Tax standing in the credit ledger account of the petitioner. 2.1 Also prayed is to set aside the communication dated 14.07.2020 issued by respondent no.3 in that regard. Order in original dated 14.07.2020 which was carried in appeal and to the extent it is adverse to the petitioner is also sought to be set aside. 2.2 The petitioner further wants to set aside paragraph 3.2 of the Circular dated 04.09.2018. 2.3 The petitioner has prayed for direction to refund of Rs. 21,71,74,611/-, which is unutilised input tax credit to be refunded without any Integrated Goods and Services Tax (IGST) debit with interest. 2.4 The petitioner has claimed interest on the amount of Rs. 14,94,881/- in respect of the period beyond 60 days from 17.04.2019, which was the date of filing of refund application, till actual payment. 3. The petitioner is engaged in the manufacture of tyres and has factory at Bhuj. The petitioner is also registered with the Goods & Services Tax Authorities. The petitioner applied on 17.04.2019 seeking refund of unutilised credit of Rs. 31,58,80,475/-, comprising of ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

..... 9,72,10,984/-. Balance of Rs. 21,86,69,491/- was rejected on the aforesaid grounds, mainly for the contravention of the procedure mentioned in the said Circular dated 04.09.2018. 3.6 The petitioner preferred appeal against the aforesaid order dated 20.06.2019. The respondent no.3, appellate authority by order dated 30.06.2020 held that the petitioner was eligible for refund of Rs. 21,71,74,611/-, but at the same time, allowed the petitioner to file a fresh claim after deducting IGST by following the procedure provided in the aforementioned Circular. The petitioner requested the appellant authority in vein to delete the words "after deducting IGST of Rs. 21,71,74,611/- from the electronic credit ledger". 3.7 When the petitioner filed fresh application dated 14.07.2020 seeking refund, it was reponded by the authority with another show-cause notice dated 20.07.2020 proposing to reject the claim of refund. It was for the reason that the petitioner had not reversed the credit of IGST of Rs. 21,71,74,611/-. 3.8 The stand of respondent no.3 is thus that the petitioner was first required to debit IGST of Rs.21,71,74,611/- in terms of procedure contemplated in paragraph 3.2 of th....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....hout payment of tax is governed under sub-section (3) of section 54 of the Act. It was submitted that sub-section (1) of section 54 provides that an application for such refund has to be preferred in such manner as may be prescribed. It was submitted that on the manner prescribed in Rule 89(4) of the Rules and it was further prescribed in circular dated 04.09.2018. The Circular was issued, it was submitted, under section 168(1) of the Central Goods and Services Tax Act, 2017, which could not be said to be in contravention with the provisions of section and rule concerned and when the petitioner had not complied with the provisions of the Circular, the refund claim was rightly rejected. 5. The petitioner claimed refund of untilised input tax credit on the ground that it had made zero rated supplies. Section 16 of the Act permits registered person to take credit of input tax credit of GST paid on capital goods and input services subject to such conditions and restrictions and in the manner as prescribed in Section 49 of the Act. 5.1 Rule 89 of the CGST Rules, 2017, deals with application for refund of tax, interest, penalty, fees or any other amount. Sub-Rule (3) of Rule 89 say....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ermore, the appellate authority had accepted the refund claim of the petitioner on merits and the petitioner's entitlement to refund was not in dispute. 5.4 While section 54 of the CGST Act provides that an application shall be made in such form and in the manner as prescribed, Rule 89(4) says that the application should be filed in the prescribed form and in the manner prescribed. Section 2(89) of the Act defines the expression "prescribed" to mean "prescribed by the Rules made under CGST Act on the recommendation of the Council". Therefore, the manner prescribed was to be one prescribed under Rule 89(3) of the Rules. 5.5 The Circular dated 04.09.2018 was the product of exercise of the powers under section 168(1) of the Act. It was an administrative instruction issued by the authority. The Circular of such nature could not substitute, amend or curtail the ambit or operation of the CGST Rules, in particular Rule 89(3), which was duly observed by the petitioner in respect of its refund claim. There was no breach of the 'manner prescribed' in the Rules in relation to lodging of the refund claim. 5.6 As the petitioner had debited the total amount of refund claim p....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....law is always subservient to the substantive law. Nothing can be given by a procedural law what is not sought to be given by a substantive law and nothing can be taken away be the procedural law what is given by the substantive law." (para 8) 6.4 Even if the procedure of claiming refund, contemplated in paragraph 3.2 of the Circular could not be adhered to, but on the other hand, there was a substantive right of the petitioner created to claim the refund in law, then non-compliance of the procedure of Circular would only amount to irregularity and not illegality. 6.4.1 In Solanki Parvatikumari Rameshbhai Vs. State of Gujarat being Special Civil Application No. 22981 of 2017, Single Judge of this Court explained the differentiation between illegality and irregularity, "5.2 Law conceives a clear differentiation between illegality and irregularity. This nice distinction brings home the case of the petitioner. An illegality is something which amounts to substantial failure in compliance of requirement. It denotes such breach of rule or requirement which alters the position of a party in terms of his right or obligation. Illegality denotes a complete defect in the juri....