Any Tax-Paying Person can Seek GST Refund Not Just Tax Depositor: Allahabad HC Clarifies S. 54 in Ambuja Cement Case [Read Order]

The Allahabad High Court, recently has clarified that Section 54 of GST ( Goods and Services Tax ) does not restrict refund applications only to the person who deposited the tax, but permits any person who has paid the tax to seek a refund upon proving such payment.

“Section 54 of the Act does not restrict that refund application has to be made only by the person who has deposited the tax, but a person paying the tax to a registered person can also make an application for refund. Section 54 of the Act contemplates that person claiming the refund has to show the proof of payment of tax and not beyond that” said the bench.

A writ petition filed by Ambuja Cement Limited, which sought refund of GST paid to its contractor for a project that was later cancelled. The authorities had rejected the refund on the ground that the applicant was not the one who deposited the tax with the Government. The High Court rejected this narrow reading and remanded the matter for fresh consideration

An EPC (Engineering, Procurement and Construction) contract was made between Ambuja Cement and Howe Engineering Projects India Pvt. Ltd. (HEPIPL) for expansion works at the company’s Dadri plant.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

In November 2022, invoices were raised and Ambuja made payments to HEPIPL, which included GST at the applicable rate. However, due to major changes in the project’s scope and timelines, HEPIPL expressed its inability to complete the revised work, and both parties mutually agreed to annul the contract through a settlement agreement in March 2023.

Subsequently, Ambuja sought refund of the GST already paid, since the underlying supply became void upon cancellation of the contract.

However, the GST authorities rejected the refund application first through the 4 August 2023 order and later by the appellate order dated 31 August 2024 on the sole ground that the application was not made by the “tax depositor,” contending that only the supplier who had deposited the GST with the Government can apply for refund.

Ambuja challenged this interpretation before the High Court.

The Court examined the statutory framework and held that Section 54(1) clearly states that “any person claiming refund of any tax… may make an application.”

The Section 54(1) of the GST Act reads that “(1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed:

Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section49, may claim such refund in 1[such form and] manner as may be prescribed.”

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

Further, the bench noted that the law does not impose any requirement that the refund must be sought exclusively by the person who actually deposited the amount with the Government. Instead, the applicant only needs to establish proof of payment of tax, which Ambuja had done by paying GST as part of the contract invoices.

The Court observed that the authorities erred in rejecting the claim on technical grounds not pondered under the Act.

Justice Piyush Agrawal said that the GST paid by Ambuja had unquestionably reached the Government treasury, and once the EPC contract was cancelled, the petitioner was entitled to seek refund of the tax component it had borne.

The Single bench stated that refund provisions are remedial and must be interpreted liberally, especially when supported by documentary evidence establishing payment.

Accordingly, the Court, ruling that the decision of the department to reject the refund was unsustainable, set aside the appellate order and remanded the matter back to the first appellate authority to reconsider the claim afresh.

Additionally, the single bench also directed that the matter be decided by way of a reasoned and speaking order within two months, after granting Ambuja an opportunity of personal hearing. The Court also clarified that its observations should not influence the outcome of the appeal.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates