High Court allows refund of ITC reversed when Tax is paid by the Supplier

The Hon'ble Delhi High Court in the case of Pedersen Consultants India Pvt. Ltd. v. Union of India and Ors. [W.P. (C) 1039/2024 dated March 19, 2024] disposed of the writ petition, thereby allowing the registered person to file refund application for the Input Tax Credit ("ITC") reversed when subsequently returns have been filed and taxes have been paid by the Supplier.

Facts

Pedersen Consultants India Pvt. Ltd. ("the Petitioner") has filed a writ petition seeking direction that the benefit of ITC  should be granted to the Petitioner on the invoices in relation to which the returns have been filed and taxes have been paid by the recipient.

The Petitioner contends that the Petitioner has been coerced into depositing the tax on the invoice by the Revenue Department ("the Respondent") in relation to which the Supplier has not filed the return within time for which subsequently, returns have been filed and taxes have been paid by the Supplier. The Petitioner further states that, the aforesaid situation would lead to double taxation, therefore, the Petitioner seeks refund of the amount that the Petitioner was coerced to deposit on the invoices.

The Petitioner, in response to the objection raised states that the Petitioner would file an application under Section 54 of the Central Goods and Services Tax Act, 2017 ("the CGST Act"). The Petitioner relying upon the Notification No. 13/2022 dated July 05, 2022 ("the Notification"), also contends that, the period between March 1, 2020 to February 28, 2023 be excluded for the purpose of limitation for filing refund application. The Petitioner further contends that, period between filing of writ petition till the passing of order be also excluded. 

Held

The Hon'ble Delhi High Court in the WP (C) 1039/2024 disposed of the writ petition, thereby permitting the Petitioner to file the refund application as mandated by Section 54 of the CGST Act, and the Respondent is required to adjudicate the claim of the Petitioner in accordance with law taking into consideration the fact that, the Petitioner would fall within the purview of Notification wherein the time period from March 1, 2020 to February 28, 2022 would be excluded for computation of period of limitation for filing refund application.

Our Comment

As per sub-section (2) of Section 41 of the CGST Act, the registered person is required to reverse the ITC availed, wherein the tax has not been paid by the supplier with effect from October 1, 2022. However, the said provision was prospectively applicable, and therefore, the registered person cannot be coerced or forced to reverse the ITC availed in relation to past period in case where the supplier has not filed the required returns and has not paid the taxes. Also, as per Section 73 and Section 74 of the CGST Act, the tax demand can be raised from the person who is obligated to pay the tax i.e. supplier. Further, the aforesaid situation would lead to double taxation wherein the ITC is reversed by the registered person during the proceedings for non-payment of tax by the Supplier to the Government which is subsequently paid by the Supplier.