Facts of the Case
- Maximum amount refundable for the month of January 2018 is ₹ 6.26 Crores.
- Balance in the electronic credit ledger at the end of January 2018 is ₹ 19 crores.
- Balance in the electronic credit ledger at the end of tax period in which refund is applied is ₹ 31 crores.
- Audit under section 65 conducted by the audit officer.
- Audit officer determined the above balances as per each head of tax i.e. CGST, SGST and IGST.
- Audit officer observed that maximum amount refundable under the head CGST and SGST is lower in the three (3) factors given above and therefore, the amount sanctioned in excess thereof is to be recovered.
- For easy reference, the table of figures is reproduced here:
(Figures in crores)
| Tax | Maximum Refund | Balance in electronic credit ledger at the end of the tax period for which refund is claimed | Balance in electronic credit ledger at the time of filing refund claim | Refund Sanctioned | Sanctioned in Excess i.e. erroneous refund |
| (1) | (2) | (3) | (4) | (5) | (6) |
| IGST | 4.30 | 3.16 | 6.58 | 3.16 | 0 |
| CGST | 0.98 | 8.10 | 12.52 | 1.55 | 0.57 |
| SGST | 0.98 | 7.74 | 12.37 | 1.55 | 0.57 |
| Total | 6.26 | 19.00 | 31.47 | 6.26 | 1.14 |
- Hence, the show cause notice.
Our Analysis
- The computation of maximum amount of refund is to be made on the basis of overall balance lying in electronic credit ledger. As in the present case, the refundable amount is ₹ 6.26 crores.
- Restricting the refundable amount to the lower of balance available in respective heads i.e. CGST, SGST and IGST is improper. In the present case, the lower of all is ₹ 6.26 Crores (i.e. lower of 6,26; 19.00; 31.47).
- Board has already acknowledged this and clarified vide Circular Number 59/33/2018 GST dated 04.09.2018 that refund should not be restricted in such circumstances. The refundable amount of ₹6.26 crores shall be debited in following order:
- IGST, to the extent available;
- CGST and SGST, equally to the extent of balance available. (In the event of any shortfall, the differential amount is debited from another head, if available).
Our Action
- Detailed representation was made before adjudicating officer.
- Matter argued at length at the time of personal hearing.
Department proceedings
- Adjudicating officer agreed with the representation made.
- Adjudicating officer dropped the entire demand.