GST update No 284 on rejection of refund in the absence of corroborative evidences

It is well known fact that claiming refund from the revenue authorities has always been a herculean task as the department is reluctant to sanction refund to the assessees. It is well established that the refund application needs to be accompanied by relevant documents as the revenue authorities may reject the claim on frivolous grounds such as non-furnishing of certain documents. As a result, aggrieved taxpayers are forced to knock the doors of court to seek relief. On similar lines, one case was reported before the hon’ble Jharkhand High Court in the case of M/S CTC (INDIA) PRIVATE LIMITED V/S COMMISSIONER (APPEALS). The decision imparted in this case is subject matter of discussion of our present update.
The petitioner is a company registered under the Companies Act and is a 100% export-oriented unit which is exporting its products to countries such as USA, China etc. A refund application was filed of accumulated input tax credit in GST RFD 01A. The petitioner while filing GSTR-3B for the month of Jan 2018, inadvertently missed out the zero-rated supplies of Rs. 3,79,82,605/- against the outward tax supplies in the return and mentioned the same as “0”. However, the same were correctly reflected in GSTR-1 against the export invoices. Therefore, a show cause notice was issued rejecting the application of refund. The reply against the notice was filed by the petitioner submitting that the excess refund filed by considering wrong Net ITC shall be rejected. The expenses mentioned under SI No. 1 to 3 were related to parts purchased for maintenance of plant and machinery used in production and hence GST credit should be allowed. Therefore, a detailed reply was submitted by the petitioner. It was further argued that the submissions and explanations of the petitioner were not taken into consideration before passing any adjudicating order. Therefore, appeal before Appellate Authority was preferred which was rejected subsequently.The Counsel of petitioner further argued that the revenue authorities passed the order without considering the facts of the case and the documents furnished by the petitioner. It was submitted that the revenue authorities failed to take into account the fact that the definition of adjusted total revenue as mentioned under Rule 89 of CGST Rules, 2017, excludes the exempted supplies and the claim of petitioner for refund falls under exempt supplies as per Section 2 of CGST Act, 2017.
The respondent submitted that the refund amount is rejected correctly as per the formula. Further, the value of zero-rated supply as per GSTR-3B is “0”, hence, the refund amount appears to be zero. Further it was argued that the refund the refund credit is inadmissible in accordance with provisions of Section 17(5) of the Act. It was also argued that the GSTR-3B is self-assessment and petitioner did not corroborate his claim by the corresponding invoices.
The Court held that it appears that the petitioner did not furnish any documentary evidence for refund claim and hence, failed to prove that the declaration of zero-rated value of GSTR-1 was legal and genuine. Since there was no corroborative evidence provided before Appellate Authority, the claim of zero-rated supply cannot be validated. It is established law that merely claiming any refund on the basis of averments would not suffice unless and until the said claim of any assessee is corroborated by documentary evidence. Reference was further drawn to Circular No. 37/11/2018-GST dated 15.03.2018. It was stated that the argument of the taxpayer of not providing opportunity of hearing is not sustainable since there was no violation of principle of natural justice. Therefore, the petition filed was rejected.
The above decision is in alignment with the Circular No. 59/33/2018-GST dated 04.09.2018 wherein in-depth discussion and clarification as regards the refund related issues has been discussed stating that the assessee claiming refund must be in possession of tax invoice and other supporting documents. However, it is well settled fact that the taxpayers are not bound by the Circular issued by the CBIC as held by the Apex Court in the case of Dhiren Chemical Industries. Therefore, refund amount which is legitimately earned by the assessees should not be deniedmerely because of procedural lapses such as not furnishing the documents.

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GST update No 284 on rejection of refund in the absence of corroborative evidences

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