Grants Partial ITC Refund on Export

HC States Petitioner cannot suffer for System glitches- Grants Partial ITC Refund on Export

Facts in related case:

The Hon’ble High Court of Delhi in the matter of Vision Distributors v. Commissioner, State GST & Others, held directed the respondents i.e. the Ministry of Finance and Goods and Services Tax Council to grant tax refund and refund of Input Tax Credit (ITC) made in cash by the petitioner and for the remaining amount to be refunded, it directed the Respondents to pass a reasoned order.

  • Vision Distributors- the Petitioner, is engaged in the business related to sale and purchase of mobile phones. The output supplies are in the course of exports made by the Petitioner outside of India. Also, the Petitioner was registered under the necessitated provisions of Delhi Value Added Tax, 2014 before the GST Regime came into effect.
  • When the Goods and Services Tax came into effect from 1st July, 2017, the Petitioner made a migration to the new taxation system. The Petitioner stated that it was entitled under Section 140 of the CGST Act, 2017, to carry forward unutilized ITC in its electronic ledger account.
  • Also, as per the Rule 117 of the Central Goods and Services Tax (CGST) Rules, 2017, the input tax credit could be submitted in Form GST TRAN-1 within ninety days of the appointed date which was July 1, 2017 in this case. The last date for submitting Form GST TRAN-1 was 28th September, 2017.
  • However, the Respondents have not made the Form GST TRAN-1 available on the GST portal till 25th August, 2017. Due to this lapse on the account of the Respondents, the Petitioner could not upload the said Form GST TRAN-1 either in the month of July, 2017, and for the month of August, 2017.
  • However, the petitioner continued the business activity of undertaking the exports. The Petitioner also stated that it made entailing export deposit of tax in cash amounting to Rs. 1,37,37,029 in the month of July, 2017. Even though the Petitioner was entitled to CGST credit and ITC refund of Rs.3,13,06,050/- as noticed on July 1, 2017.
  • The Issue recognized by the Hon’ble High Court of Delhi was that the Petitioner wants to seek a direction for issue of ITC refund of Rs. 3,05,09,355 from the respondent.

Facts held by the honorable High Court:

The following facts and details were held by the Hon’ble HC, Delhi in W.P.(C)8317/2019 that was decided on 12th December, 2019:

  • The petitioner in any circumstances cannot be made to suffer. And here the reason is the failure on account of the respondent. It is the respondent that couldn’t devise a smooth transition for GST Regime that came into effect from 1st July, 2017.The Petitioner, being an exporter under the GST regime is entitled to undertake zero rated supplies.
  • The Petitioner have claimed that he has undertaken exports in the months of July and August, 2017 and since the unutilized ITC for the same was of Rs. 3,13,06,050 and was accumulated up to June, 2017, was not reflected in its ITC ledger as on July 1, 2017, it could not utilize the same w.e.f. July 1, 2017.
  • This resulted in the Petitioner to shell out the ITC in cash, Rs. 1,37,37,029 which was not required, if proper care have been taken by the respondents for ensuring that the Petitioner utilized its accumulated ITC in the abovesaid months.
  • That the Form GST TRAN-1 was made available on the GST portal of the Respondents only from August 25, 2017.
  • That the rights of the parties cannot be subjugated on the basis of the poorly working and inefficient software systems adopted by the respondents. That the limitation of the system cannot be considered as a justification to deny the relief that the petitioner was legally entitled to.
  • Therefore, the honorable court rejected the raised hyper technical objections by the Respondents to the effect because of which refunds were not granted. This is because the system didn’t

reflect any lying credit in the ITC ledger of the Petitioner for the months of July and August, 2017. It is entirely the making of the Respondents if such a situation came up. And if the court permits the Respondents to get away with this kind of argument it will be a way of putting premium on inefficiency. Therefore, the submission was duly rejected by the court.

  • The petitioner made a claim that he was legally entitled to a full ITC refund of Rs. 3,05,09,355.
  • The court held that the refund of deposit tuning to Rs. 1,37,37,029 as claimed by the petitioner cannot be denied to him.
  • The court also, directed the respondents to make the ITC refund within four weeks from the date of the order, an amount summing up to Rs. 1,37,37,029.
  • For the remaining ITC refund amount the petitioner has already furnished and submitted the required documents.

Relevant provisions:

The applicable and relevant provisions for the above grants and order for ITC refund by the high court of Delhi are as follows-

  • Section 140 of the CGST Act, 2017: States the provision related to Transitional arrangements for input tax credit.
  • Rule 117 of the CGST Rules, 2017: States the law related to Transitional Provisional Tax or duty credit carried forward under any existing law or on goods held in stock on the appointed day.
  • Section 54 of the CGST Act,2017: States the provisions for GST Refund or tax refund and ITC Refund.
Author: Anil Agrawal
EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or