MANUAL REFUND APPLICATION UNDER GST LAWS

[Mr. M. GOVINDARAJAN]

Refund of tax

Section 54 of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) read with Rule 89 provides that any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in Form GST RFD – 01 through the common portal.   A registered person may claim refund of any unutilized input tax credit at the end of any tax period.  The application shall be accompanied by–

• such documentary evidence as may be prescribed to establish that a refund is due to the applicant; and
• such documentary or other evidence as the applicant may furnish to establish that the amount of tax and interest, if any, paid on such tax or any other amount paid in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such tax and interest had not been passed on to any other person.

If, on receipt of any such application, the proper officer is satisfied that the whole or part of the amount claimed as refund is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund referred to in section 57.     The proper officer shall issue the order within sixty days from the date of receipt of application complete in all respects.

Online filing of refund application

The GST Policy wing issued a circular vide No. 125/44/2019-GST, dated 18.11.2019 in relation to filing of refund of application online and processing the same online by the Department.  The circular provides that with effect from 26.09.2019, the applications for refunds shall be filed in FORM GST RFD 01 on the common portal and the same shall be processed electronically.   The Application Reference Number (ARN) will be generated only after the applicant has completed the process of filing the refund application in FORM GST RFD-01, and has completed uploading of all the supporting documents/ undertaking/ statements/invoices and, where required, the amount has been debited from the electronic credit/cash ledger.

 As soon as the ARN is generated, the refund application along with all the supporting documents shall be transferred electronically to the jurisdictional proper officer who shall be able to view it on the system. The application shall be deemed to have been filed under sub-rule (2) of rule 90 of the CGST Rules on the date of generation of the said ARN and the time limit of 15 days to issue an acknowledgement or a deficiency memo, as the case may be, shall be counted from the said date.  The proper officer, after observing all formalities and satisfied that the refund application is in order, makes order for refund of the amount to the applicant. 

Manual filing of refund application

The above said circular provides for filing of refund application only through electronic mode.  Rule 97A provides that notwithstanding anything contained in this Chapter, in respect of any process or procedure prescribed herein, any reference to electronic filing of an application, intimation, reply, declaration, statement or electronic issuance of a notice, order or certificate on the common portal shall, in respect of that process or procedure, include manual filing of the said application, intimation, reply, declaration, statement or issuance of the said notice, order or certificate in such Forms as appended to these rules.

Rule 97A provides that filing of refund application through electronic mode includes manual filing.  Therefore the proper officer cannot deny the refund application filed manually instead of electronic filing.  This has been confirmed by Madras High Court in ‘Laxmi Organic Industries Limited v. Union of India and others’ – 2021 (12) TMI 63 – Bombay High Court.

            In this case   the petitioner failed to upload ‘Statement – 5B’ along with the refund application which were filed online.  Therefore the petitioner applied manually for the financial years 2018 – 19 and 2019 – 2020.  The said applications were returned by the Department that the refund application has to be filed electronically in Form GST RFD – 01 in accordance with the circular No. 125/44/2019-GST, dated 18.11.2019.  Aggrieved against this order the petitioners approached the High Court with the following prayers-

• to declare the impugned circular dated 18.11.2019  in so far as it creates a condition that the refund application has to be filed online only as being wholly beyond the parent provisions (i.e. Section 54, section 16 and section 168(1) of CGST Act, 2017 and Rule 89 of CGST Rules, 2017) and hence, ultra vires the Act;
• to declare that the Petitioner is entitled to file a refund application manually as well, if he is not in a position to file the refund application online.

The petitioner contended the following before the High Court-

• Rule 97A permits processing of an application for refund filed manually and not on the common portal as referred to in the impugned circular.
• An application filed manually has to be accepted and an order passed thereon one way or the other.
•  The Superintendent acted illegally in not accepting and processing the application for refund. 

The Department submitted the following before the High Court-

• The letter issued dated 27.07.2021 issued by the Superintendent is bound by the terms of the impugned circular and, therefore, was disabled from accepting the application for refund filed by the petitioner manually.
• No illegality has been committed by the said Superintendent.
• Any provisions of Rules under the said Chapter X of the CGST Rules, 2017 when applicable for ‘electronic filing’ shall also be applicable for ‘manual filing’.
• The writ petition may not be entertained and the petitioner ought to file the application for refund in the manner prescribed by the impugned circular.

The High Court considered the submissions put forth by the petitioner and the Department and also analyzed the relevant provisions of the Act and rules made there under.

The High Court observed that section 168 of the Central Goods and Services Tax Act, 2017, which empowers the Central Board of Indirect Taxes and Customs to issue such orders, instructions or directions to the central tax officers as it may deem fit and thereupon all such officers and all other persons employed in the implementation of the CGST Act, 2017 shall observe and follow such orders, instructions or directions. There can hardly be any dispute that the said Superintendent was under an obligation to follow the terms of the impugned circular.  The said Superintendent is also equally bound by the CGST Act, 2017 and the CGST Rules and could not have turned a blind eye to rule 97A of the CGST Rules. The   Superintendent failed to appreciate that the impugned circular could not have been ignored on the face of rule 97A, which is equally binding on him in the discharge of his duties.

Since rule 97A contains a non-obstante clause, it is intended to override rules 89 to 97 of the CGST Rules forming part of Chapter X. The plain and simple construction of rule 97A is that despite rule 89 providing for electronic filing of applications for refund on the common portal, in respect of any process or procedure prescribed in Chapter X any reference to electronic filing of an application on the common portal shall, in respect of that process or procedure, include manual filing of the said application. If indeed the argument of the Department that no application in any form other than online can be received and processed is accepted, rule 97A would be a dead letter and rendered redundant. Rule 97A cannot be construed in a manner so as to defeat the purpose of legislation. The High Court concluded that the impugned circular would certainly be applicable to all applications filed electronically on the common portal, but the impugned circular cannot affect or control the statutory rule, i.e., rule 97A of the CGST Rules or derogate from it.

The High Court issued the following order-

• the impugned circular is clarified and it is observed that its terms shall be applicable only to applications filed electronically on the common portal but would have no applicability to an application for refund which is filed manually;
• the letter dated 27th July 2021 issued by the said Superintendent stands set aside
• the petitioner is permitted to file afresh the application for refund manually within a fortnight from date and on such receipt, the said Superintendent shall process the same and ensure that the application is taken to its logical conclusion in accordance with law as early as possible, preferably within 2 months thereof; and
• should the application be rejected, the order must have the support of reasons but if it succeeds no time shall be wasted to effect refund to the extent the petitioner is found eligible.