Rejection of refund of excess tax paid filed under section 54 of the CGST Act, 2017 where there is an inadvertent mistake of reflecting zero rated supplies as domestic supplies in GSTR-3B.

PJ/Case Study/2020-21/157

04 July 2020

M/s Swaroop International (OIA No. 72(DSD)CGST/JDR/2020 dated 30.06.2020)

Issue involved: Rejection of refund of excess tax paid filed under section 54 of the CGST Act, 2017 where there is an inadvertent mistake of reflecting zero rated supplies as domestic supplies in GSTR-3B.

Brief Facts: M/s Swarup International are having GSTIN 08AADFS9164J1ZP. They have claimed refund of excess tax paid by them amounting to Rs. 6,07,121/- on account of inadvertent mistake in reflecting zero rated supplies as domestic supplies in GSTR-3B for the month of May, 2018.

Applicant’s Contention: The assesse has contended in the following manner

The impugned order in original rejecting the refund claim filed by them is wholly and totally erroneous and is liable to be set aside.
The appellant submit that they have filed refund claim under section 54 of the CGST Act, 2017 read with Rule 89(2)(k) of the CGST Rules, 2017 with respect to excess payment made by them on account wrong reflection of export sales as domestic sales in the GSTR-3B filed for the month of May, 2018. The appellant submit that since the export sales were omitted to be reflected in column no. 3.1(b) of the GSTR-3B, and exports were made on payment of integrated tax, they were facing difficulty in claiming refund of IGST paid on export of goods. Consequently, they had reflected the export sales and the corresponding IGST in the column no. 3.2(b) of GSTR-3B for the month of March, 2019. The appellant submits that as they had wrongly made payment of IGST twice, they claimed refund of the wrongly paid IGST that was mistakenly shown as domestic sales in GSTR-3B for the month of May, 2018. The appellant submits that they have claimed refund of tax mistakenly discharged by debiting the input tax credit and the impugned order rejecting their refund claim merely stating that there is no express provision for the same is totally erroneous and deserves to be set aside.
The appellant submits that they are eligible for claiming refund of excess tax paid by them and this is evident from the provision contained in Rule 89(2)(k) which reads as follows:-

Rule 89 Application for refund of tax, interest, penalty, fees or any other amount:-
(2) The application under sub-rule (1) shall be accompanied by any of the following documentary evidences in Annexure 1 in FORM GST RFD-01, as applicable, to establish that a refund is due to the applicant, namely:-
(k) a statement showing the details of the amount of claim on account of excess payment of tax;
The appellant submits that the above provision clearly indicates that refund is admissible to the assessee for excess tax paid by them in GST law and the contention that there is no provision for the same is totally baseless. The appellant further submits that even while filing application for refund claim on the common portal, one of the options is that refund on account of excess tax paid. The appellant submits that they are entitled for claiming refund of excess tax paid by them due to clerical error in reflecting export sales and the denial of refund claim is not at all justifiable as the government cannot withheld any amount which was mistakenly paid by the assessee. Hence, the impugned order deserves to be set aside.

The appellant further submits that it is also alleged that by claiming refund of excess tax which was paid by utilising input tax credit, they intend to encash their input tax credit. In this regard, the appellant submits that they do not have any objection if the refund claim is allowed by way of credit in their electronic credit ledger and they do not insist in refund to be granted in cash. The appellant also submits that they are exporter and they are entitled to encash their input tax credit as there is also provision for credit accumulation on account of exports under LUT. As such, they do not have any wrong intention of encashing the input tax credit and the allegation of the impugned order is not at all tenable.
The appellant further submits that it is undisputable that they have paid excess tax in the month of May, 2018 due to wrong reflection of export sales on payment of IGST and have again paid the tax by reflecting the said export sales in the month of March, 2019. The appellant submits that when it is clear that excess tax was paid by them, the same cannot be withheld by the revenue authorities and should be returned to them either by way of refund in cash or by way of re-credit in their electronic credit ledger. In this regard, the appellant wish to place reliance on the following judicial pronouncements in support of their favour that the refund of excess paid tax is admissible to the assessee irrespective of the limitation period:-

3E INFOTECH VERSUS CESTAT, CHENNAI [2018 (18) G.S.T.L. 410 (MAD.)]

Refund - Limitation - Service Tax paid under mistake of law- Refund admissible irrespective of period covered by refund application - Further, refusing to return the amount would go against the mandate of Article 265 of Constitution of India. [paras 9, 12, 13, 14]

COMMR. OF C. EX. (APPEALS), BANGALORE VERSUS KVR CONSTRUCTION [2012 (26) S.T.R. 195 (KAR.)]

Refund - Limitation - Service tax paid mistakenly on Construction services - Department not disputing that it was not payable due to exemption notification, and that it was not passed on - Refund filed under Form ‘R’ prescribed for refund claims - HELD : Department did not have legal authority to collect Service tax, and if they did, it could be challenged as unconstitutional - Mere payment of amount could not authorize Department to regularize/validate and retain it - Department’s plea that filing of claim under Form-R indicated that assessee intended to claim refund of duty and they could not later claim that it was not duty, rejected - In that view, refund could not be rejected on ground of limitation under Section 11B of Central Excise Act, 1944. [paras 18, 19, 23]

COMMISSIONER OF C. EX., BANGALORE-III VERSUS MOTOROLA INDIA PVT. LTD. [2008 (11) S.T.R. 555 (KAR.)]

Refund - Limitation - Amount paid by mistake in excess of duty - Such amount cannot be termed as duty, hence rule of time bar not applicable to excess amount paid over duty - Refund admissible- Section 11B of Central Excise Act, 1944. [1989 (41) E.L.T. 358 (S.C.) relied on]. [para 4]
Decision:
Commissioner Appeals passed the order in favour of the assesse, allowing refund of the same.

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PJ/Case Study/2020-21/157
04 July 2020

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