IGST Refund Pleas Dismissed: Madras HC holds Debit from ECRL is Mandatory Requirement while Filing Refund Application [Read Order]

The petitioners, engaged in textile manufacturing and export, had sought refunds under the inverted duty structure for the years 2021 to 2023. Their applications were rejected by the authorities on the ground that they had not debited the refund amounts from the Electronic Credit Ledger, a procedural requirement under Section 54 of the CGST Act, 2017.

The authorities further submitted that this was the second round of claims for the same period, some of which had already been sanctioned, and that the fresh applications were filed under the wrong head, thereby making them ineligible. As the application was filed under the head 'other heads', instead of 'inverted duty structure', the system did not debit the amount from ECRL.

In addition, the counsel of the authorities said that the petitioners are also not eligible for the refund as they have already been granted refunds for the very same periods.

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The petitioners argued that they were entitled to the refund and that the authorities had rejected their claims without properly considering the supporting documents filed along with their replies to the show-cause notices.

They sought relief from the High Court, also requesting permission to file DRC-03 to enable ledger debits.

However, the State opposed the plea, submitting that no such permission was necessary and that the applications were also barred by limitation as refund claims must be made within two years.

The government counsel further contended that the petitioners had an alternative remedy of appeal before the appellate authority.

Justice Krishnan Ramasamy, after hearing both sides, held that since the refund applications were filed without compliance with the mandatory condition of debiting the ledger, the writ petitions could not be entertained.

The Court observed that issues relating to eligibility for refund and correctness of documents were factual matters which ought to be examined by the appellate authority.

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Accordingly, the writ petitions were dismissed, but the Court granted liberty to the petitioners to approach the appellate authority within four weeks, directing that such appeals, if otherwise in order, be taken on record.

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