GST Authorities fail to Consider Materials Establishing Input Supplies with regards to Refund of ITC Claimed: Delhi HC restores Appeal [Read Order]

The Delhi High Court, in its decision to restore the appeal to the appellate authority [Commissioner (Appeals)], noted that the GST authorities had neglected to take into account the evidence that supported the input supplies in relation to the Input Tax Credit (ITC) that was being claimed.

The Petitioner, K S Commodities Private Limited is engaged in export of agricultural commodities. During the relevant tax period (December, 2021), the petitioner had exported rice and sugar. The petitioner claimed that it is entitled to a refund of ITC in respect of input supplies for exporting the said commodities.

The petitioner filed an application seeking refund of ITC for the zero rated supplies on. The petitioner’s application for refund of ITC was considered by the Adjudicating Authority and it proposed to reject the same. Accordingly, the Adjudicating Authority issued a Show Cause Notice (SCN), inter alia, raising an issue that the petitioner had procured sugar with the levy of 0.1% GST and had utilised the benefit of the Notification No.41/2017 dated 23.10.2017.

It was also proposed that the refund would be restricted to the extent reflecting the petitioner’s return in Form GSTR-2A. In addition, the petitioner was also called upon to provide a reconciliation statement.

The Adjudicating Authority considered the said reply but rejected the petitioner’s application for refund, inter alia, on the ground that the petitioner was unable to co-relate the input supplies respect of which ITC refund claim was made and the export of the commodities.

The petitioner appealed against the said order before the Appellate Authority [Commissioner (Appeals)], however, the same was rejected by the impugned order.

The impugned order indicated that the Commissioner has rejected the refund claim on the ground that the petitioner was unable to satisfy that the inputs in respect of which the credit was claimed, was directly correlated to the export of the commodity in question (sugar).

Furthermore, the petitioner had also exported rice during the relevant tax period and the Appellate Authority was of the view that the petitioner had not distinguished the inputs in respect of export of rice and export of sugar.

It was further observed that since the petitioner was granted refund in respect of the inputs for the export of rice, the petitioner’s claim for refund in respect of sugar was required to be rejected.

The petitioner submitted that it had provided the necessary documents and invoices to reflect that the inputs in respect of which refund is claimed, had a direct correlation to the export of sugar.

The division bench of Justice Vibhu Bakhru and Justice Amit Mahajan observed that neither the Order-in-Original dated 27.10.2022 passed by the Adjudicating Authority nor the impugned order passed by the Appellate Authority discusses the aforesaid invoices and the material produced by the petitioner.

It was also noted that none of the said orders indicate any reason as to why the authorities have not considered the said material to be relevant for establishing that the input supplies in respect of which refund was claimed, were directly correlated to export of sugar.

While laying aside the impugned order, the High Court restored the petitioner’s appeal before the Appellate Authority for reconsideration on merits.

It was further mentioned that “the Appellate Authority shall examine the material relied upon by the petitioner and if the Appellate Authority is of the view that the same cannot be corelated to the export of sugar as claimed by the petitioner, the Appellate Authority will state the reasons for the same.”

To Read the full text of the Order CLICK HERE

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