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July 25, 2020

GST officers have no right to find a deficiency in refund application after 15 days – Delhi HC

GST officers have no right to find a deficiency in refund application after 15 days – Delhi HC

When we hear the word ‘refund’, we feel fortunate that we are going to be re-united with our funds which were once paid as taxes. There are many situations where a refund arises on GST. Understanding the refund norms and criteria’s is extremely important so that we do not excessively partake with our money. Refund under GST is covered by Rule 89 to Rule 97 of CGST Rules

Rule 89 of the CGST Rules, pertains to application for refund of tax, interest, penalty, fees or any other amount. According to Rule 89, any person, except the persons covered under notification under section 55, claiming refund of any tax, interest, penalty, fees or any other amount paid by him, other than refund of integrated tax paid on goods exported out of India, may file an application electronically in FORM GST RFD-01 through the common portal, either directly or through a Facilitation Centre notified by the Commissioner.

According to Rule 90

  • Where the application relates to a claim for refund from the electronic cash ledger, an acknowledgement in FORM GST RFD-02 shall be made available to the applicant through the common portal electronically, clearly indicating the date of filing of the claim for refund.
  • The application for refund, other than claim for refund from electronic cash ledger, shall be forwarded to the proper officer who shall, within 15 days of filing of the said application, scrutinize the application for its completeness and where the application is found to be complete in terms of sub-rule (2), (3) and (4)of rule 89, an acknowledgement in FORM GST RFD-02 shall be made available to the applicant through the common portal electronically.
  • Where any deficiencies are noticed, the proper officer shall communicate the deficiencies to the applicant in FORM GST RFD-03 through the common portal electronically, requiring him to file a fresh refund application after rectification of such deficiencies.

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From the above it can be deduced that, the Proper Officer has the time limit of 15 days to scrutinize a refund allocation. The Delhi High Court held that GST officers have no right to find a deficiency in refund application after 15 days of filing it in the case of Jian International vs Commissioner of Delhi Goods And Services Tax.

Reasons for filing Writ Petition

The writ petition had been filed seeking a direction to respondent to grant refund claimed under Section 54 of the CGST Act, 2017 as well as the grant of interest in accordance with Section 56 of CGST Act.

Submissions by the Petitioner

  • Petitioner states that in accordance with Section 54(6) read with Rule 91 of CGST Rules, 2017, proper officer is required to refund at least 90% of the refund claimed on account of zero-rated supply of goods or services or both made by registered persons within 7 days from the date of acknowledgment issued under Rule 90.
  • He states that despite the period of 15 days from the date of filing of the refund application having expired, the respondent has till date neither pointed out any deficiency/discrepancy in FORM GST RFD-03 nor it has issued any acknowledgement in FORM GST RFD-02

Submissions by Respondent

  • Respondent admitted that there was leniency on their part in processing the petitioner’s application.
  • He, however, stated that a formal deficiency memo will have to be issued as certain documents though annexed with the writ petition had not been uploaded by the petitioner along with its refund application.

Observations of the Court

  • HC found that Rules 90 and 91 of the CGST Rules provide a complete code with regard to acknowledgement, scrutiny and grant of refund. The said Rules also provide a strict time line for carrying out the aforesaid activities.
  • Rules 90 states that within 15 days from the date of filing of the refund application, the respondent has to either point out discrepancy/deficiency in FORM GST RFD-03 or acknowledge the refund application in FORM GST RFD-02.
  • In the event deficiencies are noted and communicated to the applicant, then the applicant would have to file a fresh refund application after rectifying the deficiencies.
  • In the event of default or inaction to carry out the said activities within the stipulated period, consequences like payment of interest are stipulated in Section 56 of CGST Act.
  • Admittedly, till the date of the Court hearing, the petitioner’s refund application had not been processed.
  • Also neither any acknowledgment in FORM GST RFD-02 had been issued nor any deficiency memo had been issued in RFD-03 within 15 days
  • Therefore, the refund application would be presumed to be complete in all respects in accordance with Rule 89 of CGST Rules.
  • To allow the respondent to issue a deficiency memo today would amount to enabling the Respondent to process the refund application beyond the statutory timelines as provided under Rule 90.
  • This could also be construed as rejection of the petitioner’s initial application for refund as the petitioner would thereafter have to file a fresh refund application after rectifying the alleged deficiencies.
  • This would not only delay the petitioner’s right to seek refund, but also impair petitioner’s right to claim interest from the relevant date of filing of the original application for refund as provided under the Rules.
  • Also, the respondent’s prayer to raise a deficiency memo is a hyper-technical plea as admittedly, all the relevant documents have been annexed with the present writ petition and the respondent is satisfied about their authenticity.

Consequently, High Court was of the view that the respondent had lost the right to point out any deficiency, in the petitioner’s refund application, at this belated stage. Accordingly, the Court directed the respondent to pay to the petitioner the refund along with interest in accordance with law within two weeks.

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