Goods & Services Tax (GST) in IndiaCA Certificate not required to claim refund of unutilized ITC

The Hon’ble Delhi High Court in the case of M/s. Svera Agro Ltd. v. Commissioner of Central Tax [W.P. (C) No. 11926 of 2023] decided on February 29, 2024, held that the it  was not required to submit a Chartered Accountant’s hereinafter referred to as “CA”) certificate for claiming a refund of unutilized ITC under Section 54(8)(b) of the Central Goods and Services Act, 2017 (hereinafter referred to as “CGST Act”).

FACTS OF THE CASE

Svera Agro Limited (herein referred to as the “Petitioner”), filed a refund applicatio for the period of August 2020 to March 2021 under the CGST Act. However, the Respondent rejected the claim of the Petitioner by issuing deficiency memos on the grounds that a certificate from a CA  was required under Rule 89(2)(m) of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as “CGST Rules”).

The Petitioner subsequently, sought the withdrawal of deficiency memos issued by the Respondent, , for refund claims related to May 2019 to July 2019. However, the said application was also rejected.

Aggrieved by the deficiency memo the Petitioner filed writ Petition before the Hon’ble Delhi High Court.

ISSUES BEFORE THE HON’BLE DELHI HIGH COURT

• Whether the Petitioner was required to submit a certificate from a CA  under Rule 89(2)(m) of the CGST Rules, for claiming a refund?
• Whether the deficiency memos issued by the GST department, which demanded the submission of a CA certificate, were legally valid?
• Whether the Petitioner was entitled to interest on the delayed refund due to the rejection of the deficiency memos?

CONTENTIONS OF THE PARTIES

The Petitioner argued that their refund claims were wrongfully rejected based on deficiency memos requiring a CA certificate in as much as under the proviso to Rule 89(2)(m) of the CGST Rules, such a certificate was not required if the refund pertained to unutilized ITC under Section 54(8)(b) of the CGST Act.

The  Petitioner further contended that the deficiency memos issued by the Respondent were not sustainable in law, as their case was covered under one of the exceptions provided by the statute.

While Respondent argued that as per Circular No. 125/44/2019 dated 18.11.2019, the Petitioner was required to submit a CA certificate for refunds exceeding Rs. 2 lakhs, in accordance with Rule 89(2)(m) of the CGST Rules.

The Respondent submitted that the deficiency memos were issued in accordance with the rules, and the Petitioner had failed to comply with the requisite documentary evidence for refund claims

DECISION AND FINDINGS

The Hon’ble Delhi High Court held that the deficiency memos issued to the Petitioner were unsustainable,  as Section 54(8)(b) of the CGST Act, exempts claim for refund of unutilized ITC from requiring a CA certificate, and the Petitioner’s case fell within this exemption. Consequently, the deficiency memos were set aside.

The Hon’ble Court further noted that since the refund had been delayed due to the wrongful issuance of the deficiency memos, the Petitioner was entitled to interest on the delayed refund. Hence the Hon’ble Court rightly directed the Respondent to pay the interest in accordance with Section 56 of the CGST Act, within four weeks.

The Hon’ble Court also directed that any future refund claims by the Petitioner should not be rejected solely on the grounds of limitation, considering the pendency of the present case.

AMLEGALS Remarks

The decision of the Hon’ble Delhi High Court in the present case reinforces the taxpayer’s right to claim refunds without unnecessary procedural burdens, specifically in cases of unutilized ITC.

The Hon’ble Court’s interpretation of Section 54(8)(b) of the CGST Act, and Rule 89(2) of the CGST Rules, highlights the importance of adhering to the statutory scheme and avoiding procedural excesses like the imposition of the requirement for a CA certificate where the law provides an exemption.

This ruling also brings out the significance of timely refund processing and the taxpayers’ entitlement to interest on delayed refunds, ensuring that administrative delays do not unjustly affect the business operations of the assessee.

 The judgment serves as a reminder that authorities must exercise discretion judiciously and in accordance with the legal framework, providing relief to businesses that rely on tax refunds for operational liquidity.

By setting aside the deficiency memos, the Hon’ble Court has  only corrected the procedural oversight but also ensured that the Petitioner could continue to claim future refunds without facing similar un-called for rejections.

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