2025 (6) TMI 507 - HC - GST

100% EOU - rejection of application for refund of Input Tax Credit paid on export of goods and services - maintainability of manual application for refund of Input Tax Credit (ITC) under the Central Goods and Services Tax Rules 2017 (CGST Rules) - HELD THAT - The application for refund submitted by the petitioner has been rejected solely on the ground that a manual application is not maintainable relying upon Rule 89 of the CGST Rules. The aforesaid Rule describes that a person claiming refund of any tax interest or penalty may file an application electronically in Form GST RFD-01 through the common portal either directly or through a Facilitation Centre. However Rule 97A of the CGST Rules which is incorporated on 15.11.2017 stipulates that notwithstanding anything contained in Chapter X any application/intimation notice order or certificate referred to in that chapter shall include manual filing as well. The purpose of Rule 97A of the CGST Rules is explicit. In the decision in Laxmi Organic Industries Ltd. Vs. Union of India and Others 2021 (12) TMI 63 - BOMBAY HIGH COURT the Bombay High Court had observed that since Rule 97A contains a non-obstante clause it is intended to override Rules 89 to 97 of the CGST Rules. It was also observed that 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. It was finally concluded that the circular would certainly be applicable to all applications filed electronically on the common portal but cannot affect or control Rule 97A of the CGST Rules or derogate from it. On a perusal of the impugned order it is evident that the rejection of petitioner s application for refund is not on account of any reason that the refund application already submitted by the petitioner showed the amount of refund as Nil . The impugned order has not referred to any such reason and instead found the application not liable to be processed only for the reason that it was filed manually. Conclusion - i) Manual refund applications under the CGST Rules are maintainable. ii) Rejection of refund application solely due to manual filing is unsustainable. iii) The petitioner s refund application was timely filed in view of the limitation extension. The impugned order Exhiit-P4 dated 10.08.2022 is hereby set aside - Petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether a manual application for refund of Input Tax Credit (ITC) under the Central Goods and Services Tax Rules, 2017 (CGST Rules) is maintainable despite Rule 89(1) mandating electronic filing?

- Whether the rejection of the refund application solely on the ground of non-electronic filing is legally sustainable?

- Whether the petitioner's refund claim is barred due to prior refund applications showing nil refund amounts?

- Whether the limitation period for filing the refund application was validly extended in view of the Covid-19 pandemic and related judicial pronouncements?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Maintainability of Manual Refund Application Despite Rule 89(1) of CGST Rules

Relevant Legal Framework and Precedents: Rule 89(1) of the CGST Rules prescribes that refund claims must be filed electronically in Form GST RFD-01 through the common portal. However, Rule 97A, inserted on 15.11.2017, contains a non-obstante clause stipulating that notwithstanding anything in Chapter X (which deals with refunds), any application, notice, order or certificate referred to therein "shall include manual filing as well." The Bombay High Court in Laxmi Organic Industries Ltd. Vs. Union of India and Others interpreted Rule 97A as overriding the electronic filing mandate of Rule 89, allowing manual filing of refund applications.

Court's Interpretation and Reasoning: The Court emphasized that if electronic filing were the sole mode of submitting refund applications, Rule 97A would be rendered redundant, which is impermissible. The express wording of Rule 97A, with its non-obstante clause, explicitly permits manual filing despite the electronic filing mandate under Rule 89. The Court concurred with the Bombay High Court's reasoning that Rule 97A overrides Rules 89 to 97 and that circulars mandating electronic filing cannot derogate from Rule 97A.

Application of Law to Facts: The petitioner's manual refund application for April and May 2018 was rejected solely because it was not electronically filed, relying on Rule 89 and Circular No.125/44/2019-GST. The Court found this rejection legally erroneous and perverse in light of Rule 97A's clear provision permitting manual filing.

Treatment of Competing Arguments: The respondents relied on Rule 89 and the circular to justify rejection of manual applications. The petitioner countered by relying on Rule 97A and judicial precedent. The Court favored the petitioner's interpretation, highlighting the purposive construction of Rule 97A and the principle that a later-inserted non-obstante clause overrides prior provisions.

Conclusion: Manual applications for refund under the CGST Rules are maintainable notwithstanding the electronic filing mandate in Rule 89. Rejection solely on the ground of manual filing is unsustainable.

Issue 2: Validity of Rejection Based on Prior Refund Claims Showing Nil Refund

Relevant Legal Framework and Findings: The respondents contended that since the petitioner had previously filed refund claims for the relevant period showing 'Nil' refund, subsequent refund claims cannot be entertained. However, the impugned order rejecting the refund application did not mention this as a ground for rejection.

Court's Interpretation and Reasoning: The Court noted that the rejection was exclusively due to non-electronic filing and not on account of prior nil refund claims. The petitioner's challenge on this point was therefore irrelevant to the actual reason for rejection.

Application of Law to Facts: Since the impugned order did not rely on prior nil refund claims as a basis for rejection, the argument that such prior claims barred the refund application was without foundation.

Conclusion: The rejection of the refund application was not based on prior nil refund claims and hence such contention does not sustain the impugned order.

Issue 3: Extension of Limitation Period for Filing Refund Application

Relevant Legal Framework and Findings: The refund application for April and May 2018 was filed manually on 27.05.2022, beyond the normal two-year limitation period ending May 2020. The petitioner relied on the Supreme Court's suo motu order relating to the Covid-19 pandemic, which extended limitation periods by 90 days from 01.03.2022.

Court's Interpretation and Reasoning: The Court accepted that the limitation period was extended by judicial order and therefore the refund application was filed within the extended period.

Application of Law to Facts: The petitioner's application, though belated by normal standards, was timely in view of the extension granted due to the pandemic.

Conclusion: The refund application was not barred by limitation due to the Covid-19 related extension.

3. SIGNIFICANT HOLDINGS

"Rule 97A of the CGST Rules is explicit in permitting manual filing of refund applications, notwithstanding the electronic filing mandate under Rule 89. To hold otherwise would render Rule 97A redundant and a dead letter."

"The rejection of the refund application solely on the ground that it was not submitted electronically is perverse and legally erroneous."

"The circular mandating electronic filing cannot override the statutory provision contained in Rule 97A which expressly allows manual filing."

"The limitation period for filing refund applications was validly extended by the Supreme Court suo motu order relating to the Covid-19 pandemic, and hence the petitioner's application filed on 27.05.2022 is within time."

"The impugned order rejecting the refund application did not rely on prior refund claims showing nil refund as a ground for rejection and hence such contention is without basis."

Final determinations:

- Manual refund applications under the CGST Rules are maintainable.

- Rejection of refund application solely due to manual filing is unsustainable.

- The petitioner's refund application was timely filed in view of the limitation extension.

- The respondents are directed to process the refund application and pass appropriate orders in accordance with law within four weeks.