GST Update No 318 on rejection of refund for non-submission of physical documents

It is well known that the Circulars are only directory in nature and cannot prevail over the statutory provisions. These circulars are merely advisory in nature and should not be cited as having a binding authority on the assessees. The same is also supported by decision given by the Apex Court in the case of BHAGWATI DEVELOPERS V/S PEERLESS GENERAL FINANCE & INVESTMENT CO. & ORS. However, despite these principles, it is quite disheartening that the taxpayers have to face the wrath of the revenue authorities who strictly follow the procedure prescribed in the circular ignoring the statutory provisions that adversely effects the working of the business. Recently, one such case on the same subject matter was reported before Gujarat High Court in the case of M/s CHROMOTOLAB AND BIOTECH SOLUTIONS V/S UNION OF INDIA. The decision imparted in this case is subject matter of discussion of our present update.
The petitioner prayed for direction to re-credit the amount of Rs.3,37,076/- in electronic credit ledger along with interest from the date of order dated 19.11.2019. It was stated that vide the impugned order dated 19.11.2019 the refund claim was rejected on the grounds of time barred as per Section 54 of CGST Act, 2017. The petitioner is engaged in the business of trading and clearance of finished excisable goods which are mainly used by the pharmaceutical companies. The goods were supplied to SEZ issuing tax invoices. Therefore, the supply of goods to SEZ falls within zero-rated supply and therefore, the petitioner claimed refund of the same. The refund application was filed as on 28.12.2018 on common portal and the ARN No. was generated. However, a notice was served on the petitioner rejecting the refund claim of Rs. 3,37,076/- being time barred. The hearing of the same was decided on 19.11.2019 and on the same day, refund rejection order was also passed whereby the refund of Rs. 11,421/- was sanctioned rejecting the claim of Rs. 3,37,076/-. Thereafter, the petitioner addressed a communication dated 19.11.2019 stating that proper notice was not issued and which is otherwise given after a lapse of one year without raising any query or point out any deficiency. On 31.12.2019 the undertaking of assessee of not filing of appeal was also rejected. On 03.03.2020, respondent admitted the delay in re-crediting the amount in the electronic credit ledger on account of technical issue. A complain was lodged on 04.03.2020 on help desk by the petitioner which was also in vain.
The petitioner submitted that as per the procedure laid down in the Circular dated 15.11.2017, the application was required to be filed online which was duly filed and an ARN No. was also generated. However, the printout of the application along with relevant documents was submitted in the department as on 17.10.2019.

The respondent argued that submission of the printout of the application was after expiry of due date under Section 54 of CGST Act, 2017. Therefore, the refund claim of the petitioner was partially rejected and the re-credit was not given as claimed. It was further submitted that circular dated 15.11.2017 prescribes the procedure to file application physically and the actual date of filing of the refund claim would be counted from the date when documents were submitted to the department and not from uploading of the same on portal.The court stated that the question in the present case is whether date of filing application on common portal or date of submitting printout of refund application is to be considered for the purpose of computing the limitation period for refund claim. Reference was drawn to various provisions of CGST Act, 2017 and Rules thereof. It was held that there is no dispute as regards to satisfaction of all the requirements as prescribed under Section 54 of CGST Act, 2017. In the present case, the petitioner has filed the application on the common portal within time, but the documents to be physically furnished along with the application was physically submitted on 17.10.2019. It was therefore, stated that the circular provided for procedure of filing application and filing of physical application with documents cannot have an overriding operation to the detriment of the assessee. The date of application filed on the portal has to be considered to invoke the period prescribed under Section 54 of CGST Act, 2017. Reference was drawn to decisions of Apex Court in the case OF COMMISSIONER OF CENTRAL EXERCISE, BOLPUR VS. RATAN MELTING & WIRE INDUSTRIES [2008(12) STR 416 (SC)], J.K. LAKSHMI CEMENT LTD. VS. COMMERCIAL TAX OFFICER, PALI [2018(14) GSTL 497 (SC)] wherein the Supreme Court held that the circular cannot alter the statutory provisions to the detriment to the assessee. Further it was stated that in the case of M/S. AYANA PHARMA LTD. THROUGH ITS AUTHORISED REPS. MULRAJ K. CHHEDA VS. UNION OF INDIA in SCA No. 14158 of 2021, electronic filing mode was recognized as valid instead of manual application. Hence, the period of limitation shall be invoked from the date of filing of application on the portal. The procedure mentioned in the Circular dated 15.11.2017 cannot operate as delimiting condition on the applicability of statutory provisions. It was directed to re-credit the amount in the electronic credit ledger along with interest at the rate of 9% p.a. from the date of refund rejection order.The above decision is yet another decision wherein the Courts have viewed that the Circulars cannot have an overriding effect on the statutory provisions. There had been various cases as illustrated above wherein the Hon’ble Supreme Court have thrown light on the importance of provisions of statue over the Circulars. It is high time that these judicial rulings should be followed as binding precedent failing which it will create rooms for unnecessary litigations.

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GST Update No 318 on rejection of refund for non-submission of physical documents

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