In W.P.(C) 7248/2023 -DEL HC- Delhi High Court rules Tax authorities cannot deny refund of ITC based on technical grounds, if taxpayer prevails before Appellate Authority; Says taxpayers should not be required to repeatedly apply for refunds
Justice Vibhu Bakhru & Justice Amit Mahajan [07-07-2023]

Read Order: Advance Systems V. The Commissioner of Central Excise and CGST

Chahat Varma

New Delhi, July 21, 2023: The Delhi High Court has granted relief to Advance Systems (petitioner), stating that taxpayers should not be required to repeatedly apply for refunds. The court held that if a refund was initially rejected but the taxpayer prevailed before the appellate authority, then the authorities cannot refrain from processing the claim based on technical grounds.

Factual background of the case was that the petitioner had claimed a refund of Input Tax Credit for certain exports made under a Letter of Undertaking (LUT) during the period from January 2021 to September 2021. The petitioner filed two applications for Zero Rated Supplies under Section 54(3)(i) of the Central Goods and Services Tax Act, 2017. The Commissioner of Central Excise and CGST acknowledged receipt of the claims but did not process them or upload the acknowledgment online. After a significant delay, the Commissioner issued a show cause notice proposing to deny the refund on various grounds. The petitioner requested time to respond to the notice, but the Commissioner rejected the claim. The petitioner appealed the decision before the appellate authority, which partially allowed the claim for refund. Despite the petitioner's success in the appeal, the Commissioner failed to process the refund claim. The petitioner then filed the claim again based on the Orders-in-Appeal. However, the Commissioner argued that the application was deficient because it lacked an undertaking to refund the sanctioned amount with interest if the requirements of Section 16(2)(c) of the CGST Act and Section 42(2) of the CGST Act were not complied with regarding the refunded amount.

The division bench of Justice Vibhu Bakhru and Justice Amit Mahajan opined that the petitioner should not be compelled to make repeated applications for a refund after succeeding in their appeals before the appellate authority. The bench held that the appellate proceedings were a continuation of the petitioner's initial applications for a refund. As a result, the Orders-in-Appeal should be implemented, and the refund should be processed accordingly.

The bench remarked that the Commissioner of Central Excise and CGST’s argument, citing a circular dated 03.10.2019, requiring a person who has succeeded in their claim for a refund in an appeal or any other forum to file a fresh application in form GST RFD-01, was unacceptable. The bench stated that it was not permissible for the Commissioner of Central Excise and CGST to raise any deficiency memo after a taxpayer has succeeded in appellate proceedings.

The bench further stated that while a taxpayer can file a fresh online application to initiate the processing of their refund, the authorities were not permitted to raise further deficiency memos in relation to the same claim. In conclusion, the bench ordered the Commissioner of Central Excise and CGST to promptly approve the petitioner's refund claim as accepted by the appellate authority, along with applicable interest, in accordance with the provisions of the CGST Act.