Goods & Services Tax (GST) in IndiaState GST Officials would not have any Role To Play in IGST Refunds

The Hon’ble Bombay High Court, in the case of Vergo Pharma Research Laboratories Pvt. Ltd Vs. Commissioner Of Central Tax, [WRIT PETITION NO. 222 OF 2023] held that Laments Revenue’s approach to withhold refund due to alert in automated system.

FACTS OF THE CASE

The Vergo Pharma Research Laboratories Pvt. Ltd (hereinafter referred to as “Petitioner”)  had submitted undisputed claims for Integrated Goods and Services Tax (hereinafter referred to as “IGST”) refunds totalling Rs. 5,14,22,051/-.

An alert was reflected in the automated  that processes the claims for such refunds and since there was no such alert for Petitioner’s IGST refunds, Petitioner’s refunds were not processed.

The Court on several occasions orders directing the Respondents to promptly respond to the communications of the Petitioner and and not to withhold the refund of the Petitioner without any reasons.

 Moreover  further delays were caused as  clarifications were sought from State GST officials regarding the alert. Also, there was a dispute regarding which authority had the power to lift the alert against the Petitioner. Respondent Nos. 4 and 5 sought clarification from State GST officials before taking further action, while Respondent Nos. 1, 2, and 3 indicated that the Central GST officials did not require the alert to continue.

ISSUES BEFORE THE HIGH COURT

1. Whether the Hon’ble Court should compel the Respondents to process and release undisputed IGST refund claims made by the Petitioner, totalling Rs. 5,14,22,051/-?

2. Whether  the validity of the alert reflected in the automated system that processes refund claims?

CONTENTION OF THE PARTIES

 Petitioners Contentions

i. The Petitioner  argued that the delay in processing the refunds was unjustified, especially considering that the claims were undisputed.

ii. The Petitioner also contended that despite the statement made in Court regarding the lifting of the alert, it was still reflected online, indicating that the issue persisted.

Contentions of Respondent Nos. 1, 2, and 3

i. Respondent Nos. 1, 2, and 3   argued that since the IGST refunds pertained to exports, the State GST officials were not directly involved or concerned with the issue.

ii. They further contended that there was no justification for further delay in processing the refunds, especially since the Central GST officials did not require the alert.

Contentions of Respondent Nos. 4 and 5

i. Respondent Nos. 4 and 5 insisted on further clarification from the State GST officials before lifting the alert.

ii. They argued that the decision to lift the alert and process the refunds depended on the response from the State GST officials.

FINDINGS OF THE COURT

The Hon’ble Bombay High Court (Goa Bench) has directed the Commissioner of Customs to proceed with pending IGST refunds for an Assessee, as the Revenue indicated its intention to remove the alert in the automated system. The Hon’ble Court stressed that State GST officials should not interfere in IGST refund matters related to exports, emphasizing the involvement of Central GST officials, Customs officials, and the Commissioner of Customs.

The Hon’ble Court noted that the change in the Commissioner of Customs shouldn’t require further clarification from State GST officials to lift the alert, especially when State GST officials have suggested leaving the decision to the Customs Department.

Respondent No. 5 sought further clarification from State GST officials regarding the alert. The Central GST officials indicated that they did not require the alert, while the State GST officials did not expressly state whether the alert should continue. Thus the Hon’ble Court concluded that there was no justification for further delay in processing the refunds, especially since the Central GST officials did not require the alert.

The Hon’ble Court criticized withholding refunds due to official procedures, underlining the importance of facilitating business operations and reducing delays that could burden taxpayers or impact government revenue.

AMLEGAL REMARKS

In conclusion, the Hon’ble Court’s decision in this case underscores the significance of expeditiously processing refund claims and removing unnecessary barriers like alert in automated system that impede rightful reimbursements. The ruling emphasizes the importance of judicial oversight in ensuring compliance with legal obligations and promoting efficiency in administrative processes.

By directing the immediate removal of the alert and expediting the processing of the outstanding refund amount, the Hon’ble High Court has upheld the principles of fairness and justice, thereby facilitating a conducive environment for business operations and exporters. This case serves as a reminder of the judiciary’s crucial role in safeguarding the rights and interests of all parties involved in legal proceedings.

– Team AMLEGALS assisted by Mr. Shaurya Pandey