Blog No. 36: Refund is not compulsorily electronic – it can be filed manually as well

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The procedural law related to filing of refund application has been given under Rule 89 to 97A of the CGST Rules, 2017. Rule 97A thereof clearly provides for manual filing as well as processing of refund applications. Therefore, circular providing only for electronic filing is not accordance with law as it renders rule 97A otiose.

Read about the case [Laxmi Organic Industries Ltd. Vs Union of India & Ors. Writ Petition No. 7861 of 2021 – HC (Bom)] below:

Facts of the Case:

  1. The Petitioner filed the refund application electronically for the F.Y. 2018-19 and F.Y. 2019-20.
  2. The Petitioner failed to upload “Statement 5B”.
  3. So he manually applied for refund application.
  4. The Proper officer returned the aforesaid manual refund applications without processing it by issuing a letter giving an instruction therein that in terms of Circular No. 125/44/2019-GST dated 18th November 2019, a refund application has to be filed online on the common portal and same has to be processed electronically w.e.f. 26th September 2019.
  5. Feeling aggrieved with the letter issued by the Proper officer, the Petitioner filed the writ petition before the Hon’ble Bombay High Court seeking, inter alia, the following relief: –

5.1         To issue a Writ of Certiorari or any other writ by giving them order or directions that the conditions laid down in the impugned circular is ultra vires the GST Act as they are beyond the parent provisions (i.e., Section 54, Section 16 and Section 168(1) of CGST Act, 2017 and Rule 89 of CGST Rules, 2017).

5.2         To allow him for filing manual refund application, if he is not in the position to file the refund application online.

Observations of the Court

  1. The impugned circular has been issued by CBIC in accordance with powers vested to them in Section 168 of CGST Act, 2017. There can be hardly any dispute that the Proper officer was under obligation to follow the terms of the impugned circular. However, it is axiomatic that the Proper officer is equally bound by the CGST Act and the CGST Rules and could not have turned a blind eye to Rule 97A of CGST Rules.
  2. Chapter X of the CGST Rules is titled as “Refund” and it covers Rule 89 to Rule 97A. Rule 97A contains a non-obstante clause as it intends to override Rule 89 to 97. The plain and simple construction of rule 97A is that despite rule 89 provide for electronic filing of applications for refund on the common portal it includes manual filing of the said application also. If application in any form other than online cannot be accepted, then Rule 97A would be a dead letter and rendered redundant. Rule 97A cannot be construed in a manner so as to defeat the purpose of legislation.

Decision

  1. The Hon’ble High Court has disposed of the writ petition by issuing the following order;

                8.1.       The impugned circular would have no applicability to an application for refund which is filed manually.

                8.2.       The letter issued by the Proper officer dated 27th July 2021 stands set aside.

                8.3.       The Petitioner is permitted to file afresh refund application manually within a fortnight from date. The said Proper officer shall process the same and will ensure that the application is taken to its logical conclusion in accordance with law as early as possible, preferably within two months thereof.

                8.4.       If the Proper officer reject the refund application, the order must have support of reasons but if it succeeds no time shall be wasted to effect refund to the extent the petitioner if found eligible.

Our Remarks

  1. The GST legislation provides that a registered person can claim eligible refund within 2 years from the relevant date. The refund procedure (filing and processing) was initially manual, and later on with effect from 26th September it was made electronically after issuing the impugned circular.
  2. The restriction related to only electronic filing of refund application laid down by the impugned circular is arbitrary as there is no legal rationale or justification behind such restriction. The GST legislation has not imposed any such restriction and hence the said restriction can be said inconsistent with the principal statue.
  1. Further, the aforesaid judgement has been relied by the Hon’ble Madras High Court in case of Twin Disc Power Transmission Pvt. Ltd. Vs The Deputy Commissioner (ST), GST-Appeals in WP No. 26929 of 2021 wherein the Court pronounced the decision as;

“8. Prima facie it appears that the issue is now settled in favour of the petitioner in the light of the decision of the Hon’ble Bombay High Court in Lakshmi Organic Industries Ltd. Vs Union of India and Ors……

  1. Though the petitioner….The representation of the petitioner may also be examined in the light of the order of the Hon’ble Bombay High Court in the above noted case with in period of four weeks from the date of receipt of a copy of this order…”.
  2. As a concluding remark, we can say that the impugned circular cannot take away the vested right of the taxpayer. However, it has opened the lead to another round of legal disputes.

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