Refund application cannot be kept pending on the ground of pendency of proceedings

The Hon'ble Rajasthan High Court in M/s B.C. Power Controls Ltd. v. Union of India [D.B. Civil Writ Petition No. 13049 of 2020dated April 18, 2023] held that the refund application of IGST cannot be kept pending indefinitely on the ground of pendency of proceedings.

Facts

M/s B.C. Power Controls Ltd. ("the Petitioner") manufactures electrical wires and allied products engaged in the business of export.  While exporting goods various export invoices, shipping bills, and bills of lading were generated by the shipping line. The shipping bills are treated as application for refund of IGST as per Section 54 of the Central Goods and Services Tax Act, 2017 ("the CGST Act") read with Section 16 of the Integrated Goods and Services Tax Act, 2017 and Rule 96 of the Central Goods and Services Tax Rules, 2017 ("the CGST Rules").

A Show Cause Notice was issued to the Petitioner by DGGI, Gurugram dated July 17, 2020 ("the SCN") alleging the production of fake invoices and the application of refund was kept pending as the proceedings initiated vide the SCN were pending. Aggrieved, the Petitioner filed the present writ petition.

The Petitioner submitted that an application for refund cannot be kept pending indefinitely as the provision of law mandate decision of refund applications within a stipulated period.

Issue

Whether refund application can be kept pending indefinitely on the ground of pendency of proceedings?

Held

The Hon’ble Rajasthan High Court in D.B. Civil Writ Petition No. 13049 of 2020 held as under:

• Noted that, no order was passed by the competent authority on the Petitioner’s application for refund.
• Observed that, application for grant of refund cannot be kept pending with an oral information that the claim was withheld and once an application for refund is submitted it has to be decided in accordance with the laws applicable.
• Held that, the refund application cannot be pending indefinitely on the ground of pendency of the proceedings.
• The writ Petition is disposed of.  

Relevant Provision

Section 54 of the CGST Act

"Refund of Tax

(1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed:
Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in such form and manner as may be prescribed.
...
(10) Where any refund is due  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."