The Madras High Court in its recent ruling in the case of Platinum Holdings Private Limited has held that any entity can file for Refund under section 54 of CGST Act and accordingly allowed refund of GST to the Special Economic Zone (SEZ) which was disallowed by Revenue stating that only the supplier is eligible to claim refund.
Facts of the case:
- The petitioner Platinum Holdings Private Limited is a Special Economic Zone (SEZ) and has affected purchases from several suppliers/vendors for the development of the SEZ. The petitioner has sought for refund of taxes paid under the GST Act(s).
- The Petitioner had filed applications for refund of the taxes erroneously remitted by it on various dates to its suppliers. A show cause notice was issued where the locus of the Petitioner to claim the refund was questioned on ground that as per Section 54 of the CGST Act read with Rule 89 of CGST Rules, only a supplier of services would be entitled to claim refund and not the SEZ itself.
- The Petitioner argued that it had committed an error by remitting the taxes on the supplies made to it as the supplies being made to it were zero rated supplies exempt from tax.
- It was further contended that the reference in Section 54 of the CGST Act to ‘any person’ and would include the SEZ as well and accordingly, it shall be entitled to claim the refund of erroneously remitted tax.
Order of Madras High Court: Deliberations and Ruling
- The High Court noted that the statutory scheme for refund admits of applications to be filed by any entity that believes that it is so entitled, including the petitioner SEZ. The language of Rule 89, echoes that of Section 54, and both the aforesaid provision and Rule commence with the phrase ‘any person‘. The only exclusion is of the person covered under a notification issued under Section 55, admittedly inapplicable to the petitioner.
- High Court didn’t agree with argument of the Revenue that refund application should be filed only by the supplier for the reason that Rule 89(1) does not envisage any such restriction and, in their view, applies to any entity. No doubt, the second proviso refers to a supplier of an SEZ, which is only one kind of entity that may make an application under Rule 89 This is not to say that the reference to a supplier, will exclude, by virtue of such reference, other applicants.
- The High Court adjudged that on a combined reading of Section 54 and Rule 89, the restriction which has been read into the provision by the Revenue is, in my view, misplaced. In fact, the Officer in the impugned order proceeds on the basis that the second proviso to Rule 89 deploys the word ‘only‘, which I do not find in the second proviso. It is a settled position that there can be no insertion of a word or phrase in a statutory provision or in a Rule which must be read and applied, as framed. No restrictions or amplifications of the Rule are permissible by interpretation.
In view of above deliberations the single judge bench of Justice Anitha Sumanth allowed the appeal and held that the statutory scheme for refund under the GST Act(s), permits any entity to seek a refund of taxes, including an SEZ. It was observed that the provisions of Section 54 of the CGST Act, providing for a refund, apply to any person who claims such refund and who makes an application for the grant of the same.
Relevant Statutory provisions:
Section 54 of the CGST Act
REFUNDS
(1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed:
(4) The application shall be accompanied by—
(a) such documentary evidence as may be prescribed to establish that a refund is due to the applicant; and
(b) such documentary or other evidence (including the documents referred to in section 33) as the applicant may furnish to establish that the amount of tax and interest, if any, paid on such tax or any other amount paid in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such tax and interest had not been passed on to any other person:
Explanation.—For the purposes of this section,––
(1) “refund” includes refund of tax paid on zero-rated supplies of goods or services or both or on inputs or input services used in making such zero-rated supplies, or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilized input tax credit as provided under sub-section (3).
(2) “relevant date” means—
(a) in the case of goods exported out of India where a refund of tax paid is available in respect of goods themselves or, as the case may be, the inputs or input services used in such goods,––
(i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India; or
(ii) if the goods are exported by land, the date on which such goods pass the frontier; or
(iii) if the goods are exported by post, the date of dispatch of goods by the Post Office concerned to a place outside India;
(b) in the case of supply of goods regarded as deemed exports where a refund of tax paid is available in respect of the goods, the date on which the return relating to such deemed exports is furnished;
(c) in the case of services exported out of India where a refund of tax paid is available in respect of services themselves or, as the case may be, the inputs or input services used in such services, the date of––
(i) receipt of payment in convertible foreign exchange, where the supply of services had been completed prior to the receipt of such payment; or
(ii) issue of invoice, where payment for the services had been received in advance prior to the date of issue of the invoice;
(d) in case where the tax becomes refundable as a consequence of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court, the date of communication of such judgment, decree, order or direction;
(e) in the case of refund of unutilized input tax credit under sub-section (3), the end of the financial year in which such claim for refund arises;
(f) in the case where tax is paid provisionally under this Act or the rules made thereunder, the date of adjustment of tax after the final assessment thereof;
(g) in the case of a person, other than the supplier, the date of receipt of goods or services or both by such person; and
(h) in any other case, the date of payment of tax.
Rule 89 of the CGST Rules
REFUND
Application for refund of tax, interest, penalty, fees or any other amount.-(1)Any person, except the persons covered under notification issued 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 either directly or through a Facilitation Centre notified by the Commissioner:
Provided that any claim for refund relating to balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49 may be made through the return furnished for the relevant tax period in FORM GSTR-3 or FORM GSTR-4 or FORM GSTR-7,as the case may be:
Provided further that in respect of supplies to a Special Economic Zone unit or a Special Economic Zone developer, the application for refund shall be filed by the –
(a) supplier of goods after such goods have been admitted in full in the Special Economic Zone for authorized operations, as endorsed by the specified officer of the Zone;
(b) supplier of services along with such evidence regarding receipt of services for authorized operations as endorsed by the specified officer of the Zone:
(2) The application under sub-rule (1) shall be accompanied by any of the following documentary evidences in Annexure 1 in FORM GST RFD-01, as applicable, to establish that a refund is due to the applicant, namely:-
(2) The application under sub-rule (1) shall be accompanied by any of the following documentary evidences in Annexure 1 in FORM GST RFD-01, as applicable, to establish that a refund is due to the applicant, namely:-
[(f) a declaration to the effect that tax has not been collected from the Special Economic Zone unit or the Special Economic Zone developer, in a case where the refund is on account of supply of goods or services or both made to a Special Economic Zone unit or a Special Economic Zone developer;
Section 16 of the IGST Act
ZERO RATED SUPPLY
16. (1) “zero rated supply” means any of the following supplies of goods or services
or both, namely:––
(a) export of goods or services or both; or
(b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.
(2)Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply.
(3) A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:––
(a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or
(b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
excellent rendition
Thanks Sir