Goods & Services Tax (GST) in IndiaRefund cannot be Denied in Absence of Allegation of Irregularity Against the Supplier

The Delhi High Court in Solidum and Stars Guild LLP v. Commissioner of Central Tax, Appeal-II [(2023) 154 taxmann.com 271 (Delhi) decided on 24.08.2023], held that refund cannot be denied in absence of allegation regarding irregularity against the supplier.

FACTS

Solidum and Stars Guild LLP, (hereinafter referred to as “the Petitioner”) had filed refund application dated 21.05.2021, claiming a refund of the amount of Rs. 76,76,106/-, relating to Input Tax Credit (hereinafter referred to as the “ITC”), in respect of goods exported during the period November 2020 to March 2021.

The filing was acknowledged by the Adjudicating Authority, and a Show Cause Notice (hereinafter referred to as “SCN”) dated 09.07.2021 was issued, proposing to reject the Petitioner’s claim for non-existent suppliers and mismatch in invoice and FOB values.

The Petitioner replied to the SCN, claiming that the purchases made were genuine from dealers that were registered. The refund claimed was rejected by the Adjudicating Authority vide the Order-in-Original dated 05.08.2021 (hereinafter referred to as the “impugned order-in-original”), as on physical verification, one of the suppliers named M/s Siddhi Impex was found to be non-existent at their registered place of business.

The Petitioner preferred an appeal under Section 107 of the Central Goods and Services Tax Act, 2017, (hereinafter referred to as the “CGST Act”), which was again rejected vide Order dated 31.05.2022 (hereinafter referred to as the “impugned appellate order”), on the grounds that two invoices pertained to M/s Siddhi Impex amounting to Rs. 21,76,260/- were fraudulently claimed as the supplier was found to be non-existent.

Thus, the Petitioner has filed the present petition for availing the refund for the amount except the supplies by M/s. Siddhi Impex.

ISSUE BEFORE THE HIGH COURT

• Whether the Petitioner is eligible for the refund of balance amount of ITC except the supplies from M/s Siddhi Impex?

CONTENTIONS OF THE PARTIES

The Petitioner contended that there was no allegation regarding any irregularity in respect to supply made by the suppliers other than M/s. Siddhi Impex and was neither dealt by the Adjudicating Authority or Appellate Authority.

DECISION AND FINDINGS

The Delhi High Court observed that there was no reason for the denial of refund of ITC pertaining to supplies made by suppliers other than M/s Siddhi Impex. Therefore, the Adjudicating Authority was directed to process the Petitioner’s claim to extent of Rs. 54,99,846/- along with interest within a period of four weeks from the date of the order.

AMLEGALS REMARKS

The Delhi High Court has directed the refund of ITC pertaining to amount, where there was no allegation regarding irregularity of the supplier. The High Court has upheld the objective of the taxation legislation that in absence of any allegation or illegality, the taxpayers should not suffer.

-Team AMLEGALS, assisted by Mr. Bhavya Sharma (Intern)

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