A two-judge bench of the Gujarat High Court has held that if the authorities acknowledge the error and accept repayment of the erroneous refund, it is logical to restore the ITC in the electronic tax ledger.
The assessee, a Company registered under the Companies Act was engaged in the business of manufacturing various types of toys. It was also registered under the GST Act and was issued the ‘advance license’ enabling duty-free import of its raw material. During FY 2017-18 to FY 2020-21, the applicant, inadvertently, cleared and exported its finished goods upon payment of the Integrated Goods and Services Tax instead of exporting them under the Letter of Undertaking (LoU). Since the exports were made upon the payment of IGST, the applicant periodically received an auto-refund of the IGST paid at the time of exports.
The Bench comprising Justice JB Pardiwala and Justice Nisha Thakore observed that “if the authorities have accepted that there was an error and resultantly, accepted repayment of the erroneous refund, as a corollary, the credit of the ITC must be restored. It cannot be that for the purpose of repayment, there was an error, and for the purpose of restoration of the ITC, there was no error. There is no question of any refund of the ITC at all. The question is one of restoration of the ITC in the electronic credit ledger and not a refund thereof. Hence, any reference to sub-rule (10) of rule 96 of the CGST Rules is completely misconceived and not tenable.”
Disposing of the petition, the bench directed that the restoration of ITC in the sum of Rs.1,39,49,810/- in the electronic credit ledger of the writ-applicant.
“This is the sum that was erroneously refunded by reducing the ITC from the electronic credit ledger. However, as noted earlier, the same has already been repaid by the writ-applicant along with interest in DRC-03. Once such an amount is repaid by the writ-applicant to the GST department, the original debit of the ITC must be recredited/restored. Otherwise, the same would amount to double taxation, which is not permissible in law,” the Court said.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.
