Delhi HC: Section 54(3) the GST Act envisages refund of unutilized ITC under only two circumstances

IN THE HIGH COURT OF DELHI

The Extract of the Judgment as follows :

Delhi High Court: Section 54(3) the GST Act envisages refund of unutilized input tax credit under only two circumstances viz. zero-rated supplies made without payment of tax and credit accumulated on account of inverted tax structure, however subject to provisions of sub- section 10 of section 54 of CGST Act, 2017. The competent authority rejected the tax claim on the ground suppliers have passed on fake Input Tax Credit for which the taxpayer is claiming refund. Delhi High Court dismissed the writ petition challenging the order of the competent authority with liberty to pursue appellate remedy.

Ajanta Industries v. Commissioner of Central Goods & Services Tax; W.P. (C) NO. 6609 OF 2021; 16.07.2021

A Writ Petition writ petition was filed challenging the rejection order passed by a competent authority. Petitioner sought refund of Rs. 2,05,05,890/- for the period of April 2020-May 2020 along with interest thereon in accordance with law.

It was Petitioner’s contention that was unable to discharge its GST liability in the third half of the year 2020-21 due to financial constraints. It was stated that the Petitioner had duly filed all its returns upto April and May 2020 and is entitled to refund within sixty days from the date of filing Form GST-RFD-01 in accordance with Section 54(7) of the Central Goods and Services Tax Act, 2017. He states that as per Rule 90 of Central Goods and Services Tax Rules, it is mandatory to issue the acknowledgement in RFD-02 within fifteen days and if not done, all further proceedings would be without jurisdiction. Consequently, according to petitioner, due to lapse of time, the respondent is bound to grant refund as prayed for.

However, a perusal of the impugned order reveals that very serious findings of fake Input Tax Credit were pointed out by the competent authority in the impugned order. It is evident that Section 54(3) the GST Act envisages refund of unutilized input tax credit under only two circumstances viz. zero-rated supplies made without payment of tax and credit accumulated on account of inverted tax structure, however subject to provisions of sub- section 10 of section 54 of CGST Act, 2017

From the report of Anti Evasion, It is clear that the L1 and L2 suppliers have passed on fake Input Tax Credit for which the taxpayer is claiming refund. Premise of the taxpayer was found locked at the time of visit by Anti Evasion. No documents in response to the Summons have been submitted by taxpayer. The taxpayer has neither submitted any documents to the Anti Evasion branch till date nor appeared before the investigation agency.

However, since none of the findings given in the impugned order like premises of the petitioner being found locked during inspection; the partner of the petitioner not responding to the Summons; and L1 & L2 suppliers having issued fake and bogus invoices and passed on fake Input Tax Credit, have been dealt with leave alone challenged.

Consequently, Delhi Court was of the view that it would not be appropriate to entertain the present writ petition Moreover, as the impugned order is an appealable order, present writ petition is dismissed, with liberty to the petitioner to avail the appellate remedy in accordance with law. Needless to say that the appeal shall be decided on its own merit without being influenced by any observation made by this Court.