ITC Refund Denied on the Basis of Technical Glitches in GSTN Software is unfair

The Madurai bench of Madras High Court on 18th March, 2021 set aside the order rejecting refund claim of CGST and IGST of the assesse wherein, the entire refund liability of Input Tax Credit (“ITC”) got auto populated under a single head i.e. State Goods and Services Tax (“SGST”) in the case of Tvl. Mehar Tex (Petitioner) Vs. Commissioner of Central GST And Central Excise (Respondents). The case is described as under:

Facts of the Case 

Petitioner is an exporter and made zero rated sales during the months October 2017,
November 2017 and February 2018. He was also entitled to corresponding refund under all the three heads, namely, SGST, CGST and IGST.
Accordingly a refund application was filed by petitioner where after uploading the file, the entire claim got consolidated and figured under the head of SGST alone.

The Assistant Commissioner of GST and Central Excise while considering the refund applications restricted the refund claim to the extent of the petitioner's liability for the respective months only under the head of SGST under Rule 92 of CGST Rules, 2017 and rejected the refund claims made in respect of the other heads.
However, the Respondent rejected the refund claims made in respect of CGST and IGST on the ground that the Petitioner has not furnished any documentary proof in support of his claims, whereas the petitioner had submitted the refund applications manually also.

Issue

Can the respondent deny the Petitioner’s claim for refund of CGST and IGST on the ground that the entire refund amount got consolidated under one head i.e. SGST, due to the technical error and new system of software in GSTN? 

Observation

• As per the order passed by the Respondent, the supporting invoices and documents furnished as proof of exports by the Petitioner were in order, therefore, the Petitioner was eligible to get refund claim under all three heads namely IGST, CGST and SGST.
• It was also observed that, the Petitioner cannot be expected to produce some proof, due to the error on the part of any software in GSTN, wherein, the entire refund amount of ITC got auto-populated under the head of SGST instead of SGST, CGST and IGST.
• Further, the Petitioner had in reply to show cause notice categorically stated that the entire refund amount got auto-populated under single head of SGST. Moreover, the Petitioner had also filed the refund application manually.
• If the petitioner was otherwise eligible to refund, on the ground of technical glitches and error having occurred due to auto-population, the petitioner ought not to be denied relief. Nothing can be more unfair.

Judgment

The bench after considering the above facts and observations passed the following judgements: 

• Held that, refund ought not to be denied only on the grounds of technical glitches and error that occurred due to auto-population. Nothing can be more unfair.
• The order passed by the Respondent was set aside to the extent that rejected the refund claim of the Petitioner. 
• Remanded back the matter to the Respondent directed the Respondent to verify the Petitioner’s refund claim and accordingly refund the amount to the Petitioner within a period of 8 weeks.