FIRC Need Not Match Transaction-Wise for ITC Claims if Total Benefit Supported by Foreign Remittances: Delhi HC [Read Order]
The Court observed that the petitioner, engaged in export of Ayurvedic cosmetic goods, had furnished proof of exports and remittances, which were earlier accepted while sanctioning refund claims.
The High Court of Delhi, held that Foreign Inward Remittance Certificate (FIRCs) need not match transaction-wise for Input Tax Credit ( ITC ) claims, provided the total benefit is supported by foreign remittances.
Transformative Learning Solutions Pvt Ltd, petitioner-assessee, was engaged in exporting Ayurvedic cosmetic goods. An audit was conducted by the Central Goods and Service Tax (CGST) Department for the period 2017-18 to 2021-22 based on the petitioner’s submitted documents. During the audit, the Department raised objections regarding ITC claims, communicated on 25th and 31st January, 2024.
The primary objection, forming the bulk of the demand, was that the petitioner failed to provide proof of foreign remittances, such as BRCs or FIRCs. The Department noted that the petitioner’s bank statements showed lump-sum INR credits from its foreign branch, which did not align with the invoice-wise or period-wise export records.
The CGST Department stated that the petitioner did not address the objections raised nor respond to the communication of 31st January, 2024. The final findings were sent to the petitioner in FORM GST ADT-02 on 14th May, 2024.
The petitioner still did not settle the liabilities. On 29th May, 2024, the Department issued a pre-show cause notice via DRC-01A, informing the petitioner of the tax, interest, and penalty payable. The petitioner filed a reply on 3rd June, 2024 with documents, which the Department rejected.
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The CGST Department issued a Show Cause Notice to the petitioner on 16th July, 2024. The petitioner replied on 28th August, 2024 and attended a personal hearing on 5th December, 2024. The Department then passed the impugned order, confirming a tax demand of Rs. 20,14,98,627 along with interest and an equal penalty.
The order upheld the extended period of limitation, imposed interest under relevant provisions, and appropriated Rs. 29,33,217 of already reversed ITC against the demand.
The petitioner argued that the impugned order was vague and unreasoned, as it rejected the refund claimed. It had sought a refund of accumulated ITC and submitted proof of exports and foreign remittances, which were verified by the CGST Department. During the audit period, the petitioner regularly filed refund claims with supporting documents, which had earlier been sanctioned.
The petitioner also submitted documents addressing the Department’s objections, but these were not considered. The order rejected the refund, stating only that the FIRCs and invoices were numerous and could not be reconciled.
Aggrieved, the petitioner filed the petition. Notice was issued on 29th April, 2025, and the respondent submitted its counter affidavit, which was taken on record.
Justice Prathiba M Singh and Justice Shail Jain heard the parties and reviewed the counter affidavit. It held that FIRCs did not need to match transaction by transaction and could be on a periodic basis, as long as the total claimed benefit was supported by the foreign exchange remitted to the petitioner. The Court concluded that the matter required reconsideration.
The bench set aside the impugned order dated 31st January, 2025 and directed the petitioner to appear before the Adjudicating Authority (AA). A fresh notice for personal hearing was to be issued. After considering the petitioner’s submissions during the hearing, the AA was directed to decide the SCN afresh.
The petition and any pending applications were disposed of accordingly.
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