In Special Civil Application No. 22339 of 2022 -GUJ HC- Gujarat High Court grants relief to M/s. Shree Renuka Sugars Ltd., says refund claim cannot be dismissed on technical grounds
Justice Vipul M. Pancholi & Justice Devan M. Desai [13-07-2023]

Read Order: Messrs Shree Renuka Sugars Ltd V. State of Gujarat

Chahat Varma

New Delhi, July 31, 2023: The Gujarat High Court has ruled in favour of Messrs Shree Renuka Sugars Ltd. (petitioner), stating that the petitioner's claim for a refund of Rs. 10,20,28,733 cannot be dismissed solely on technical grounds, given that all substantive conditions for the refund were met.

Brief background of the case was that the petitioner, a company in the sugar industry, was engaged in manufacturing, trading, and supplying sugar and allied products. They imported raw sugar under the Advance Authorization Scheme, with exemption from integrated tax. The exports made by the petitioner fell under zero-rated supplies, as per Section 16 of the Integrated Goods and Services Tax Act, and no tax was paid on these exports. Consequently, Input Tax Credit (ITC) remained unutilized and accumulated in the petitioner's credit ledger. The case pertained to the petitioner's refund claims of unutilized ITC for the period of 11 months in Financial Year 2020-2021 and 2021-2022, totalling Rs. 1,10,67,67,172. However, due to an inadvertent arithmetical error by their employee, the petitioner mistakenly lodged claims for a lower amount of Rs. 1,00,47,38,439. Upon realizing the error, the petitioner lodged supplementary refund claims for the remaining amount of Rs. 10,20,28,733. However, the authorities refused to sanction and pay the supplementary refund, claiming that the category under which the claims were lodged was not applicable to the petitioner.

Upon reviewing the records, the bench of Justice Vipul M. Pancholi and Justice Devan M. Desai observed that out of the total refund amount of Rs. 1,10,67,67,172, the authorities had already granted a refund of Rs. 1,00,47,38,439 to the petitioner. The remaining dispute pertained to the refund of Rs. 10,20,28,733. The bench noted that the petitioner had realized an arithmetical error in the refund applications and had subsequently filed supplementary applications within the statutory period specified in Section 54(1) of the Central Goods and Services Tax Act, to claim the remaining refund amount. However, as the petitioner had already filed a refund application under Clause 7(c) (accumulated ITC category) for the same month and period, they were unable to file another supplementary application for the differential refund amount caused by the arithmetical error. The bench considered this as a technical error and emphasized that such errors should not lead to outright rejection of the petitioner's claim without proper examination by the authority in accordance with the law.

The bench referred to the case of M/s Bodal Chemicals Ltd v. Union of India [LQ/GujHC/2022/7353], wherein the Division bench of the Gujarat High Court had emphasized that the authorities cannot evade responsibility by claiming inability to correct technical glitches.

Therefore, the challenged orders were quashed and set aside. The authorities were instructed to permit the petitioner to manually submit the refund applications for the omitted amount of Rs. 10,20,28,733.