Madras HC Overturns Rejection of GST Refund Application due to Inverted Turnover and GSTR1, 3B and 2A Discrepancy [Read Order]

In a recent ruling, the Madras High Court overturned the rejection of Goods and Services Tax ( GST ) refund application due to the Discrepancies between Inverted Turnover and GSTR 1, 3B and 2A

The Petitioner, Sri Krishna Textile Mills stated that it is engaged in the business of manufacturing and supplying cotton yarn out of combed cotton and synthetic staple fibre. On account of the fact that the inputs purchased by the petitioner are taxed at higher rates than the output, it is stated that the petitioner has unutilised input tax credit, and is, consequently, entitled to refund.

Upon making such a refund application, the application was rejected on the ground that the inverted turnover does not match the GSTR returns.

The counsel for the petitioner argued that all requisite documents were submitted and that the rejection failed to adhere to Circular No.135/05/2020-GST. Conversely, Mrs. K. Vasanthamala, learned Government Advocate (Taxes), highlighted the petitioner’s failure to respond to the rejection notice or appear before the Officer, leading to the rejection.

The bench noted that on perusal of the impugned order, the following reasons are set out for rejecting the application. “On verification of the refund details, with GSTR 1, GSTR 3B and GSTR 2A returns, the inverted turnover does not match with GSTR Returns.”

The petitioner further asserted that all relevant documents, including invoices raised by the supplier and invoices issued by the petitioner in respect of outward supplies were submitted.

Considering the submissions, a Single bench of Justice Senthil Kumar Ramamoorthy found procedural discrepancies in the rejection order and remanded the matter to the respondent for reconsideration.

The court noted that “The respondent should have examined the application in accordance with Section 54 of applicable GST enactments, the rules framed thereunder and the Circular referred to above. Since such exercise has not been undertaken properly, the matter requires reconsideration.”

The petitioner was granted three weeks to submit additional documents, and the respondent was directed to provide a reasonable opportunity for a personal hearing and issue a fresh order within two months thereafter.

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