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2024 DIGILAW 2044 (GUJ)

Khodiyar Trading v. Union Of India

2024-11-21

BHARGAV D.KARIA, D.N.RAY

body2024
JUDGMENT : (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1. Heard learned advocate Mr. Uchit Sheth for the petitioner and learned Senior Standing Counsel Ms. Hetvi Sancheti for the respondent. 2. Rule returnable forthwith. Learned Senior Standing Counsel Ms. Hetvi Sancheti for the respondent waives service of notice of rule. 3. Having regard to the controversy arising in this petition in narrow compass, with the consent of the learned advocates for the parties, the matter is taken up for hearing. 4. By this petition under Articles 226 and 227 of the Constitution of India, the petitioner has prayed for the following reliefs: “A. This Hon’ble Court may be pleased to issue a writ of mandamus or writ in the nature of mandamus or any other writ or order directing the respondents to forthwith enable rectification of error in the returns in Form GSTR-3B filed for the months of January and March 2023 in accordance with Section 39(9) of the GST Acts; B. This Hon’ble Court may be pleased to issue a writ of mandamus or writ in the nature of mandamus or any other writ or order directing the respondents to forthwith grant refund of the excess payment of tax that the petitioner was forced to pay a result of non-availability of functionality to rectify any error or omission in the returns filed for the months of January and March 2023 along with statutory interest on such refund; C. This Hon’ble Court may be pleased to issue a writ of certiorari or writ in the nature of certiorari or any other writ or order quashing and setting aside impugned order dated 05.12.2023 (Annexed at Annexure J) rejecting the refund claim of the petitioner.” 5. Brief facts of the case are as under: 5.1 The petitioner is a proprietory concern engaged in the business of trading in Cotton. The petitioner is duly registered under the provisions of the Central/State Goods and Service Tax Act,2017 [for short ‘the GST Act’]. The petitioner files return and pays tax under the GST Act. 5.2 The petitioner made purchases of cotton from farmers in the month of January 2023 and the same were supplied to the registered buyers. The petitioner is required to pay GST on reverse charge mechanism on purchases made from agriculturists. The petitioner files return and pays tax under the GST Act. 5.2 The petitioner made purchases of cotton from farmers in the month of January 2023 and the same were supplied to the registered buyers. The petitioner is required to pay GST on reverse charge mechanism on purchases made from agriculturists. 5.3 However, at the time of filing of return in Form GSTR-3B for the month of January 2023, the consultant of the petitioner erroneously had shown the payment of GST on sale of cotton through electronic cash ledger as output tax liability instead of bifurcating it between the liability of the tax on reverse charge basis on purchases of cotton from agriculturist and output tax liability. Therefore, no tax was shown to be paid on reverse charge basis nor any input tax credit was claimed in respect of such tax. 5.4 It is the case of the petitioner that there was an error made by the consultant as the liability on purchases on reverse charge basis was not admitted and paid and effectively, the tax was paid including the liability of reverse charge basis on the entire output sales and output tax liability was discharged through electronic cash ledger. 5.5 The petitioner realised the error in the month of March 2023 but, in absence of any mechanism for rectification of return for the month of January 2023, the petitioner showed the liability of reverse charge tax to be paid for the month of January 2023 on the purchases in Form GSTR-3B filed for the month of March 2023 and accordingly the petitioner paid higher amount of tax of Rs.53,08,494/- through electronic cash ledger. 5.6 The petitioner, therefore, filed a refund application on 12.07.2023 to claim the excess amount of payment made in the month of March 2023. The respondent issued the deficiency memo on 26.07.2023 to the petitioner on the ground that the amount paid by the petitioner in the month of March 2023 for the reverse charge liability cannot be considered as an excess payment of tax. 5.7 The petitioner therefore, raised a grievance at the GST help desk of the respondent seeking permission to rectify the return filed in Form GSTR-3B for the months of January and March 2023 in terms of section 39(9) of the GST Act which entitles the registered taxable person to rectify the returns. 5.7 The petitioner therefore, raised a grievance at the GST help desk of the respondent seeking permission to rectify the return filed in Form GSTR-3B for the months of January and March 2023 in terms of section 39(9) of the GST Act which entitles the registered taxable person to rectify the returns. However, the petitioner received a reply Email dated 23.09.2023 from the GST Helpdesk that option to revise the return in Form GSTR- 3B which has already been filed is not available and that adjustment, if any, is permissible only in the return of subsequent month. The petitioner therefore, again filed refund application under “Any other category” on 09.10.2023. 5.8 The respondent issued the showcause notice dated 24.11.2023 proposing to reject the refund on the ground that in the facts of the case of the petitioner, it cannot be said that the petitioner has made excess payment of tax. 5.9 The petitioner filed reply to the show-cause notice contending that the grievance was raised for allowing rectification of return, however, no solution was provided and accordingly, the petitioner is entitled to the refund of excess payment of tax as per the documents furnished by the petitioner before the respondent-authority. 5.10 However, the respondent No.3- Assistant Commissioner, CGST-Division, Surendranagar, by order dated 05.12.2023 rejected the refund application on the ground that there is no excess payment of tax. Being aggrieved, the petitioner has preferred this petition with the aforesaid prayers. 6. Learned advocate Mr. Uchit Sheth for the petitioner invited the attention of the Court to Form GSTR-3B filed by the petitioner for the month of January,2023 at Annexure A (Page 14) to point out that the outward taxable supplies was shown as Rs. 11,07,22,685.63 and the GST paid was of Rs. 55,36,134/- whereas in Item (d) of Table 3.1, inward supplies (liable to reverse charge) was shown as Nil. Thereafter, reference was made to the Form GSTR-3B filed for the month of March,2023 at Annexure B (page 19) to point out that for the month of March 2023, outward taxable supplies was shown Rs. 8,74,36,457.25 for which, tax payable was Rs. 43,71,816/- after considering the reverse charge inward supplies liable to reverse charge for the said month. However, the petitioner paid total amount of Rs. 96,80,310/- through electronic cash ledger to correct the error of not showing the reverse charge liability for the month of January 2023. 8,74,36,457.25 for which, tax payable was Rs. 43,71,816/- after considering the reverse charge inward supplies liable to reverse charge for the said month. However, the petitioner paid total amount of Rs. 96,80,310/- through electronic cash ledger to correct the error of not showing the reverse charge liability for the month of January 2023. It was therefore submitted that there was an excess payment of Rs.53,08,494/- (Rs. 96,80,310 - Rs. 43,71,816). 6.1 It was submitted that the petitioner, in order to comply with the provisions of the GST Act on realizing the mistake committed in the return for the month of January 2023, has made the payment of reverse charge liability in the month of March, 2023. It was submitted that respondent No.3 has passed impugned order dated 05.12.2023 without assigning any reason and without considering such details, only on the ground that there is no excess payment was seen in the refund claim period. It was submitted that on scrutiny of the returns along with explanation tendered by the petitioner in the refund application, it is apparent that the petitioner has made excess payment towards reverse charge liability to the tune of Rs. 53,08,494/-. 6.2 Learned advocate Mr. Uchit Sheth also referred to and relied upon Circular No. 26/2017-GST dated 29.12.2017,more particularly, para 4 thereof wherein, it is clarified that where the adjustment is not feasible in Form GSTR-3B, the refund may be claimed by the assessee. It was therefore, submitted that the respondents be directed to allow the refund application preferred by the petitioner. 7. On the other hand, learned Senior Standing Counsel Ms. Hetvi Sancheti for the respondent submitted that the petition may not be entertained as there is alternative efficacious remedy available to the petitioner by preferring an appeal under section 107 of the GST Act to challenge the impugned order dated 05.12.2023 passed by the respondent No.3 rejecting the refund application. 7.1 It was further submitted that the petitioner has erroneously misinterpreted the provision of Circular No. 26/2017 dated 29.12.2017 to the effect that rectification of refund in subsequent months would not permit inserting negative entries and if adjustment is not feasible, refund may be claimed. 7.1 It was further submitted that the petitioner has erroneously misinterpreted the provision of Circular No. 26/2017 dated 29.12.2017 to the effect that rectification of refund in subsequent months would not permit inserting negative entries and if adjustment is not feasible, refund may be claimed. However, the circular in fact provides for refund only if no adjustment is feasible in the output tax liability or input tax credit, whereas in the facts of the case, liability incurred by the petitioner on reverse charge basis for the month of January 2023 has not been adjusted by way of payment in the electronic cash ledger which cannot be said to be an excess the payment of tax. Reliance was placed on the following averments made in the affidavit-in-reply filed on behalf of the respondent No.3 “11. I submit that the interpretation of the Petitioner in respect of the Circular No. 26/26/2017-GST dated 29-12-2017 is erroneous. It is the case of the Petitioner that the circular provides that while rectification of returns in subsequent months would not permit inserting negative entries, if adjustment is not feasible then refund can be claimed, However, the circular provides for refund only if no adjustment is feasible in the output tax liability or input tax credit and in the instant case, the liability incurred by the Petitioner on a reverse charge basis for the Month of January has been adjusted / accounted for by way of input tax credit in GSTR-3B filed for the month of March-2023. It is undisputed that the said amount is available with the Petitioner as input tax credit. Hence, no question of refund arises. 12. Without prejudice to all that has been stated and submitted hereinabove, I submit that a similar issue came up for consideration before the Hon'ble Apex Court in the matter of Union of India vs. Bharti Airtel Limited and others (SLP No. 8654 of 2020). In the said matter, the concerned Hon'ble High Court was pleased to read down paragraph 4 of the Circular No. 26/26/2017-GST dated 29.12.2017 issued by the Commissioner (GST), to the extent it restricted the rectification of Form GSTR-3B in respect of the period in which the error had occurred. The Hon’ble Apex Court was pleased to observe as follows: “47. In the said matter, the concerned Hon'ble High Court was pleased to read down paragraph 4 of the Circular No. 26/26/2017-GST dated 29.12.2017 issued by the Commissioner (GST), to the extent it restricted the rectification of Form GSTR-3B in respect of the period in which the error had occurred. The Hon’ble Apex Court was pleased to observe as follows: “47. Significantly, the registered person is not denied of the opportunity to rectify omission or incorrect particulars, which he could do in the return to be furnished for the month or quarter in , which such omission or incorrect particulars are noticed. Thus, it is not a case of denial of availment of ITC as such. If at all, it is only a postponement of availment of ITC. The ITC amount remains intact in the electronic credit ledger, which can be availed in the subsequent returns including the next financial year. It is a different matter that despite the availability of funds in the electronic credit ledger, the registered person opts to discharge OTL by paying cash. That is a matter of option exercised by the registered person on which the tax authorities have no control, whatsoever, nor they have any role to play in that regard. Further, there is no express provision permitting swapping of entries effected in the electronic cash ledger vis-a-vis the electronic credit ledger or vice versa.” (emphasis supplied) A copy of the said judgment dated 28.10.2021 passed in SLP No. 8654 of 2020 is hereto annexed and marked as Annexure-1. I submit that the present case is also not a case of denial of input tax credit, but postponement of the same. I submit that it was the Petitioner who, rather than taking Input Tax Credit by paying tax on reverse charge basis, opted to discharge the entire output tax liability by cash payment. Thus, no refund arises as there is no excess payment of duty but only accumulation in ITC due to late discharge of liability on reverse charge basis on inward supply which is now sought as refund in cash. Thus, no refund arises as there is no excess payment of duty but only accumulation in ITC due to late discharge of liability on reverse charge basis on inward supply which is now sought as refund in cash. However, as held by the Hon’ble Supreme Court, there is no express provision permitting swapping of entries effected in the electronic cash ledger vis-a-vis the electronic credit ledger or vice versa.” 7.2 It was further submitted that in view of the above averments, the petition may not be entertained and the petitioner may be relegated to avail alternative efficacious remedy on merits. 8. Considering the submissions made by learned advocates for the respective parties, on perusal of the Form GSTR-3B and the returns for the month of January and March 2023, it is apparent that the petitioner has, in order to rectify the error committed while filing the return in Form GSTR-3B for the month of January 2023 by not reflecting the reverse charge liability and clubbing the same in the output tax liability, rectified in the return filed for the month of March 2023 by payment of excess amount of Rs. 53,08,494/- through electronic cash ledger. The excess payment made by the petitioner would be apparent from the details filed by the petitioner in the undertaking filed along with refund application which can be summarized as under: Particulars January 2023 March 2023 Outward supply 11,07,22,685.63 8,74,36,457.25 Inward supply liable to reverse charge 10,88,46,615.50 8,47,59,522.75 9. Therefore, the inward supply liable to reverse charge for both the months i.e. January and March 2023 would be Rs. 19,36,06,13,825/- [10,88,46,615.50 + 8,47,59,522.75]. The petitioner has therefore, paid the tax on the inward supplies of Rs. 19,36,06,13,825/- amounting to Rs.96,80,310/- through electronic cash ledger in the month of March 2023. The petitioner has already paid the tax on outward supplies for month of January 2023 amount of Rs.55,36,134/-which included the inward supply liable to reverse charge which was not shown separately. In fact, the petitioner was liable to pay Rs. 54,42,332.88 on inward supply liable to reverse charge in the month of January 2023. 10. Therefore, the petitioner is entitled to refund of Rs. 53,08,494/- which was paid in excess along with return in Form GSTR- 3B for the month of March,2023. 11. In fact, the petitioner was liable to pay Rs. 54,42,332.88 on inward supply liable to reverse charge in the month of January 2023. 10. Therefore, the petitioner is entitled to refund of Rs. 53,08,494/- which was paid in excess along with return in Form GSTR- 3B for the month of March,2023. 11. With regard to issue of entertaining the petition, we are of the opinion that as the respondent-authority has not given any reason while rejecting the refund claimed by holding that there is excess payment, we have gone through the facts which are placed on record and it would be a futile exercise to remand the matter back to the respondent-authorities as it is apparent from the facts of the case and in view of the Circular No. 26/2017 that the petitioner is entitled to the refund claimed. In such circumstances, we have entertained the petition. 12. In view of the foregoing reasons, the petition succeeds and is accordingly allowed. Respondent No.3 is directed to process the refund claimed by the petitioner within a period of twelve weeks from the date of receipt of copy of this order. Rule is made absolute to the aforesaid extent. No order as to costs. Direct Service through Email is permitted.