In a recent case, the Delhi High Court directed the Goods and Service Authority to reconsider the matter since the GST refund was rejected based on a mismatch without considering the Reconciliation statement.
M/s Shivbhola Filaments Private Limited, the petitioner challenged the impugned order whereby, the appeals preferred by the petitioner (eight in number) against the eight separate orders, all dated 31.12.2020, passed by the Adjudicating Authority, were rejected.
The petitioner is engaged in the manufacturing of Polypropylene Yarn and Polypropylene narrow woven fabric, which is chargeable to Goods and Services Tax (GST) at the rate of 12% and 5% respectively.
The petitioner claimed that raw materials used for manufacturing the product (Granules, Master Batch, Spin Finish Oil) are chargeable to GST at the rate of 18%. The petitioner claimed that due to the inverted tax structure, it was unable to avail the entire credit of input tax paid by it on inputs in the discharge of its tax liability on output.
The petitioner had filed refund applications dated 23.10.2020 for various tax periods from August, 2018 to March 2019. The petitioner received “Notice of Rejection of Application for Refund” dated 18.12.2020 (Show Cause Notice) in respect of each of its refund applications. The petitioner was also called upon to show cause as to why its refund applications should not be rejected.
The petitioner’s applications for refund were proposed to be rejected for the reason that there was a mismatch with the returns filed by the petitioner in form GSTR 2A. The petitioner responded to the said show cause notices and furnished a reconciliation statement for each tax period.
It was argued that the petitioner was not allowed to be heard by the Adjudicating Authority and thus, the refund rejection orders were required to be set aside. Second that the petitioner had furnished the reconciliation statement scaling down its refund claims, yet the same was rejected on the ground that there was a mismatch in the returns filed.
It was evident that in the reconciliation statement, the appellant has included the value of waste of HSN 55051090 attracting GST @ 18%, goods of HSN code 5402 of traded goods which do not fall under the category of inverted rated goods.
The concerned authorities cannot simply reject an application for a refund on the ground of any mismatch without permitting the taxpayer to reconcile the same and provide the necessary explanations.
A division bench comprising Justice Vibhu Bakhru and Justice Amit Mahajan set aside the impugned Order and restored the petitioner’s applications for a refund before the Adjudicating Authority for determining the amount of refund payable to the petitioner after affording the petitioner an opportunity to be heard.
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