2023 (2) TMI 179 - HC - GST

Seeking direction of the respondent to release the refund of IGST amounting to Rs.14, 80, 27, 927.67/- which is allegedly withheld illegally - HELD THAT - The petitioner purchased the goods from Sayan Greemochem Private Limited who had purchased goods from Prince Chemicals who is placed in the list of L2 risky supplier and therefore the IGST refund of the petitioner was withheld on the ground of availing of wrong ITC by the petitioner. It is however found from the record that the petitioner has reversed the Input Tax Credit of Rs.11, 55, 726/- along with penalty and interest towards the said goods purchased. In this case the petitioner has filed shipping bills for all the exports and the petitioner is not prosecuted for any offence under the Act or under the existing law and has also reversed the ITC therefore there is no point for the respondents herein to withheld the refund. In the case of BHAGYANAGAR COPPER PRIVATE LIMITED VERSUS THE CENTRAL BOARD OF INDIRECT TAX AND CUSTOMS AND 5 OTHERS 2021 (11) TMI 152 - TELANGANA HIGH COURT it was held that If the suppliers of the petitioner are found to be genuine the petitioner is entitled to claim credit of the taxes paid on such purchases effected. The respondents-authorities are directed to grant the amount of IGST refund to the petitioner as claimed by the petitioner as provided under Section 54(6) of the CGST Act r/w Rule 91 of the CGST Rules and credit such amount to the petitioner s account within a period of three weeks from the date of receipt of copy of this order. Petition allowed in part.

Summary

Issues:
Petition seeking direction for release of withheld IGST refund amount, classification as risky exporter, compliance with GST laws, financial impact on petitioner, delay in refund disbursement, legal provisions for refund issuance, relevance of Circular No.131/1/2020-GST, verification process, withholding refund based on risky supplier classification, provisional refund, non-compliance with Section 54(6) of CGST Act, relevance of Telangana High Court judgment.

Analysis:
The petitioner, a partnership firm engaged in manufacturing and exporting organic pigments, filed a petition under Article 226 seeking the release of a withheld IGST refund amounting to Rs.14,80,27,927.67. The petitioner was classified as a risky exporter, leading to a delay in refund disbursement, causing financial distress and potential business closure. The petitioner sought various reliefs, including the removal of the risky exporter tag and provisional refund of 90% of the claimed amount.

The respondents, through affidavits-in-reply, highlighted the initiation of inquiries, suspension as per RMCC instruction, and the need for NOC from DGARM for refund disbursement. The petitioner's compliance with verification processes, submission of necessary documents, and reversal of Input Tax Credit were emphasized. Respondents contended that the refund was withheld due to alleged wrongful ITC availed by the petitioner.

The petitioner's counsel argued that the refund withholding was arbitrary, citing violations of relevant provisions of the CGST Act and Rules. Reference was made to Circular No.131/1/2020-GST, highlighting delays in report submission and subsequent refund disbursement. The counsel also relied on a Telangana High Court judgment to support the petitioner's claim for refund.

After considering submissions, the Court found that the petitioner had complied with the necessary procedures, including reversal of ITC, and there was no legal basis for withholding the refund. The Court emphasized the obligation to grant provisional refunds as per Section 54(6) of the CGST Act and directed the respondents to credit the IGST refund amount to the petitioner's account within three weeks, aligning with the Telangana High Court's observations.

In conclusion, the judgment addressed the issues of delayed refund disbursement, compliance with GST laws, and the arbitrary withholding of refunds based on risky exporter classification. The Court's decision emphasized the importance of procedural fairness and adherence to legal provisions in refund processing, ultimately granting relief to the petitioner for the withheld IGST refund.