Bombay HC direct the GST Authority to grant IGST refund as no adverse order against the taxpayers

The Bombay High Court has ordered the GST authority to process an IGST refund claim for Evertime Overseas Private Limited. The company sought a refund for exported goods, but the authority had withheld it due to a pending investigation. However, the court found no adverse order against the petitioner and directed the authority to consider the refund application on its merits after hearing the company, aiming for a decision within eight weeks.

In Evertime Overseas Private Limited v. Union of India and ors. [WRIT PETITION NO.3793 OF 2021 dated October 8, 2021], Evertime Overseas Private Limited ("the Petitioner") filed petition claiming that he is entitled to refund under the provisions of Section 16 of the Integrated Goods and Services Tax Act, 2017 ("the IGST Act").

Factually, the Petitioner claimed the refund under the provisions of Section 16 of the IGST Act in respect of the goods that have been supplied & exported. It is submitted by the Petitioner that the claim for refund is not being processed by Respondent on the ground that the investigation is pending against the Petitioner.

The Petitioner invited attention to the provisions of  Section 54(10) of the Central Goods and Services Tax Act, 2017 ("the CGST Act") which says that where any refund is due under Section 16(3) of the CGST Act to a registered person who has defaulted in furnishing any return or who is required to pay any tax, interest or penalty which has not been stayed by any Court, Tribunal or Appellate Authority by the specified date, the proper officer may withhold payment of refund due until the said person has furnished the return or paid the tax, interest or penalty, as the case may be and deduct from the refund due, any tax, interest, penalty, fee or any other amount which the taxable person is liable to pay but which remains unpaid under the CGST Act or under the existing law.

Moreover, the Petitioner submits that in the teeth of the provisions of Section 54(10) of the CGST Act,the action on the part of the Respondent refusing to process the refund on the ground that the investigation is pending is untenable. On the other hand, the Respondent submitted that the department is justified in not processing the application on the count of a pending investigation to secure the interest of the revenue.

The Hon’ble Bombay High Court held that there is no order or decision on record against the Applicant claiming refund. And it would be appropriate to direct the Respondent to process the application made by the Petitioner for refund and pass a reasoned order upon hearing the Petitioner. The claim for refund be decided as expeditiously as possible on its own merits and preferably within a period of eight weeks from today.

Relevant Provisions:

Section 54 (10) of the CGST Act: Where any refund is due under sub-section (3) to a registered person who has defaulted in furnishing any return or who is required to pay any tax, interest or penalty, which has not been stayed by any court, Tribunal or Appellate Authority by the specified date, the proper officer may-

(a) withhold payment of refund due until the said person has furnished the return or paid the tax, interest or penalty, as the case may be;

(b) deduct from the refund due, any tax, interest, penalty, fee or any other amount which the taxable person is liable to pay but which remains unpaid under this Act or under the existing law.

Explanation.– For the purposes of this sub-section, the expression "specified date" shall mean the last date for filing an appeal under this Act.