M/S. Choksi Exports vs Union Of India
2023 Latest Caselaw 870 Guj

     C/SCA/23798/2022                                       ORDER DATED: 03/02/2023




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
             R/SPECIAL CIVIL APPLICATION NO. 23798 of 2022
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                              M/S. CHOKSI EXPORTS
                                     Versus
                                 UNION OF INDIA
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Appearance:
MR.AVINASH PODDAR(9761) for the Petitioner(s) No. 1
NOTICE SERVED for the Respondent(s) No. 1,2,7
PRIYANK P LODHA(7852) for the Respondent(s) No. 3,4
MR NIKUNT K RAVAL(5558) for the Respondent(s) No. 5,6
MR CB GUPTA(1685) for the Respondent(s) No. 8,9
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 CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI
       and
       HONOURABLE MR. JUSTICE SANDEEP N. BHATT

                                Date : 03/02/2023

                        ORAL ORDER

(PER : HONOURABLE MR. JUSTICE SANDEEP N. BHATT)

1. This petition is filed under Article 226 of the

Constitution of India, wherein, this Court, initially on

24.11.2022 issued the notice. After service of notice

pursuant to the said order, learned advocates filed

appearance on behalf of respondent nos.3,4,5,6,8 and 9.

Though served, no appearance is filed for respondent

nos.1,2 and 7.

2. Thereafter, on 18.1.2023, this Court passed the

following order:

C/SCA/23798/2022 ORDER DATED: 03/02/2023

"1. Petitioner under Article 226 of the Constitution of India is seeking direction of the respondent to release the refund of IGST amounting to Rs.14,80,27,927.67/-, which is allegedly withheld illegally violating the provisions of section 54(6) of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017 read with Rule 91(1) of the Central Goods and Services Tax Rules, 2017 and Gujarat Goods and Services Tax Rules, 2017.

2. Petitioner is a partnership firm having its registered office in the State of Gujarat, which is engaged in the business of manufacturing and exporting of Organic pigments and is registered under the GST law.

3. The petitioner had been marked as "risky exporters". On 10.12.2021, respondent No.9 visited the premises of the petitioner for physical verification. The petitioner has submitted all information as prescribed under Circular No.131/1/2020-GST dated 23.01.2020, vide email dated 17.01.2022. There are other compliance to be made, which have already been done and eventually the grievance of the petitioner was moved by way of a Grievance Application dated 15.06.2022.

4. Due to the pendency of the refund, the petitioner is facing huge financial crises and, hence, is before this Court

C/SCA/23798/2022 ORDER DATED: 03/02/2023

seeking following reliefs:

"25. In the aforesaid circumstances, the Petitioner most humbly pray before your Lordship:

(a) To issue the writ of mandamus or any other appropriate writ in the nature of mandamus writ, order or direction directing the respondents to disburse the refund of IGST along with applicable interest @ 9% p.a.

(b) Pending admission, hearing and till final disposal of this petition, as ad ad-interim relief, Your Lordships may be pleased to direct the respondents to grant provisional refund of 90% of refund amount claimed.

(c) To issue the writ of mandamus or any other appropriate writ in the nature of mandamus writ, order or direction directing the respondents to remove the tag of risky exporters.

(d) To issue order(s), direction(s), writ(s) or any other relief(s) as this Hon'ble Court deems fit and proper in the facts and circumstances of the case and in the interest of justice;

(e) To award Costs of and incidental to this application be paid by the Respondents;"

5. We notice that the affidavit-in-reply is filed on behalf of respondents No.5 and 6 indicating that the inquiry was initiated after the exporter had been suspended on

C/SCA/23798/2022 ORDER DATED: 03/02/2023

25.10.2021 as per the RMCC instruction. On his having been identified as "risky exporter" for grant of IGST refund, the same had been kept in abeyance, as is usually being done. Again, Level-1 inquiry had been conducted and that had also been cleared. The report also has been given to respondents No.8 and 9.

6. Issuance of the refund will be by Assistant Commissioner of Customs, respondent No.6 herein. The matter is pending with Respondent No.7, Director General, DGARM for issuance of no objection certificate. Learned counsel appearing for the respondent had requested for short time to seek instructions in this regard from respondents No.3 and

4. Let the same be filed on 25.01.2023.

7. Matter to be posted on 01.02.2023."

3. Today, when the matter is called out, learned

advocate Mr.Poddar for the petitioner, learned advocate

Mr.Lodha for respondent nos.3 and 4, learned advocate

Mr.Raval for respondent nos.5 and 6 and learned

advocate Mr.Gupta for respondent nos.8 and 9 appeared

and put up their submissions.

4. Learned advocate Mr.Poddar for the petitioner

C/SCA/23798/2022 ORDER DATED: 03/02/2023

submitted that inspite of various letters and reverting

ITC along with interest and penalty, neither the

respondent no.7 has replied back to the petitioner nor

the name of the petitioner was removed from the list of

risky exporters. He submitted that earlier the firm has

exported various goods and had duly received the refund

of IGST on those exports. However, since the firm has

been marked as Risky Exporter by respondent no.7, the

firm is not in receipt of the refund of IGST. He further

submitted that because of the inaction on behalf of the

respondents for refund, the working capital of the

business is blocked and therefore the business is on the

verge of shutting down its operations. He also submitted

that the firm is suffering is financial loss of more than Rs.11 lacs per month as the petitioner has to pay

interest for the working capital borrowings from the

bank due to blockage of working capital on account of

delay in receiving the IGST refunds.

4.1 Referring to the relevant provisions of the

Central Goods and Services Tax Act (`CGST' for short),

he submitted that the refund of ISGT amounting to

Rs.14,80,27,927.67 ps. which is withheld is in violation of

C/SCA/23798/2022 ORDER DATED: 03/02/2023

provisions of Section 54(6) of the CGST Act and GGST

Act read with Rule 91(1) of the CGST Rules and the

GGST Rules. He submitted that Section 54(6) of the

CGST Act and Rule 91(1) of the CGST Rules proclaims

that the respondents are bound to issue the refund of

90% of the amount claimed by the registered person

within 7 days from the date of acknowledgment of

refund application except in the case where the person

claiming refund has, during any period of five years

immediately preceding the tax period to which the claim

for refund relates, not been prosecuted for any offence

under the Act or under an existing law where the

amount of tax evaded exceeds two hundred and fifty

lakh rupees. He submitted that in the present case, the petitioner has filed shipping bills for all the exports and

the petitioner is not prosecuted for any offence under the

Act under any existing law and therefore, the concerned

officer has to issue 90% of refund within seven days

from the date of shipping bill, however, the same has

not been done and more than one year has elapsed in

some exports.

4.2 He further referred to Rule 96(4) of the CGST

C/SCA/23798/2022 ORDER DATED: 03/02/2023

Rules and submitted that the refund can be withheld by

the respondents only if a request has been received from

the jurisdictional Commissioner of central tax and export

of goods or services due to the person claiming refund in

accordance with the provisions of Section 54(10) or 54(11)

of the CGST Act or if the proper officer of the customs

determine that the goods were exported by the registered

person violating the provisions of the Customs Act, 1961.

Learned advocate for the petitioner submitted that

though the case of the petitioner does not fall under any

of the above Sections 54(10) or 54(11) of the CGST Act,

the refund is withheld by the respondents, which action

is arbitrary in nature.

4.3 Learned advocate has further referred to the

Circular No.131/1/2020-GST dated 23.1.2020 issued by the

respondent no.2 which prescribes the procedure to be

followed by the exporters as Risky exporters and as a

part of that, the petitioner already submitted few details

and documents on 17.1.2022 and the report should have

been furnished to the Chief Commissioner of Central Tax

within 30 days who will forward the same to RMCC

within five days i.e. the report should have been

C/SCA/23798/2022 ORDER DATED: 03/02/2023

furnished on or before 17.2.2022. However, in the present

case, as mentioned under the reply of the CPGARM,

report has been forwarded on 12.4.2022. He submitted

that the respondent no.7 should have refunded the IGST

withheld on receipt of the report. However, the

respondent no.7 has not refunded the same and violated

the norms of the circular as well.

4.4 Lastly, he relied on the decision of the

Telangana High Court in the case of Bhagyanagar

Copper Private Limited V/s The Central Board of

Indirect Tax & Customs & Ors. In W.P.No.15804 of

2021, more particularly, on paragraph 21 of the same

and submitted that in similar facts, the Telangana High Court has passed the order of refunding the IGST

withheld of the petitioner therein. He, therefore, prayed

to allow this petition and direct the respondents-

authorities to refund the IGST withheld by them.

5. Per Contra, learned advocates Mr.Raval

referred to the affidavit-in-reply filed on behalf of

respondent nos.5 and 6 and submitted that the inquiry

C/SCA/23798/2022 ORDER DATED: 03/02/2023

was initiated against the exporter had been suspended

on 25.10.2021 as per the RMCC instruction. He

submitted that on the petitioner being identified as `risky

exporter' for grant of IGST refund, the same has been

kept in abeyance. He submitted that again Level-1

inquiry was conducted and that has also been cleared

and the report is already given to respondent nos.8 and

9 herein. He further submits that on the basis of the

verification report of the jurisdictional CGST officer, the

DGARM issued NOC and the office of respondent nos.5

and 6 can revoke the suspension only after the receipt of

NOC from DGARM, New Delhi-respondent no.7 herein

and after the suspension is revoked, the Customs

Automated Systems will automatically disburse all the pending IGST refund of the exporter.

6. Learned advocate Mr.Gupta for respondent

nos.8 and 9 referred to the affidavit-in-reply filed by

respondent nos.8 and 9 and submitted that the name of

the petitioner was forwarded by respondent no.7 for

verification of credentials. After following the procedure of

verification in terms of the relevant circular, initially

negative verification report was sent to respondent no.7

C/SCA/23798/2022 ORDER DATED: 03/02/2023

on 15.2.2022. Thereafter, after detailed verification along

with the supporting documents, as the petitioner paid

the Input Tax Credit along with interest and penalty

and the investigation was concluded, a positive

verification report was sent to respondent no.7 on

12.4.2022. Thereafter, again the name of the petitioner

appeared as `risky exporter' and a positive verification

report was sent to respondent no.7 on 7.7.2022.

Thereafter, on an e-mail sent by respondent no.7 along

with the representation made by the petitioner indicating

that the petitioner has voluntarily reversed Input Tax

Credit of Rs.11,55,726/- along with interest and penalty,

the same was verified and a positive report was sent on

12.10.2022 to the respondent no.7. Learned advocate Mr.Gupta submitted that as the petitioner has availed

wrong Input Tax Credit, his refund is withheld and

therefore this petition be dismissed.

7. Though served, no appearance is filed on

behalf of respondent no.7.

8. We have considered the submissions canvassed

C/SCA/23798/2022 ORDER DATED: 03/02/2023

by learned advocates for the parties and having gone

through the documents produced on record. The petitioner

purchased the goods from Sayan Greemochem Private

Limited who had purchased goods from Prince Chemicals,

who is placed in the list of L2 risky supplier and

therefore the IGST refund of the petitioner was withheld

on the ground of availing of wrong ITC by the

petitioner. It is, however, found from the record that the

petitioner has reversed the Input Tax Credit of

Rs.11,55,726/- along with penalty and interest towards

the said goods purchased. Further, none of the provisions

of the CGST Act and the IGST Act mandate the

petitioner to verify the genuineness of the suppliers of

the supplier, even though safeguards is provided to recover the taxes, if not paid or wrongly availed by the

petitioner's supplier or supplier's supplier. In this case,

the supplier's supplier is placed in the list of L2 risky

supplier and even then, with a hope to get the IGST

refund, the petitioner has paid the ITC, but still the

refund is not processed and given to the petitioner.

9. Further, the respondents ought to have granted

the provisiosnl refund to the extent of 90% as provided

C/SCA/23798/2022 ORDER DATED: 03/02/2023

under Section 54(6) of the CGST Act read with Rule 91

of the CGST Rules, which the respondents failed to do

so. Even after submission of the positive verification

report to the respondent no.7, the respondent no.7 herein

has not issued the NOC for issuing the refund and even

after issuance of notice and adjourning the matter on

some occasions, there is no representation on behalf of

respondent no.7. In this case, the petitioner has filed

shipping bills for all the exports and the petitioner is

not prosecuted for any offence under the Act or under

the existing law and has also reversed the ITC,

therefore, there is no point for the respondents herein to

withheld the refund.

10. In the case of Bhagyanagar Copper Private

Limited (supra), the Telangana High Court has observed in paragraph 21 as under:

"21. Even if the claim of the respondents as to non- completion of verification of suppliers of the petitioner up to two levels is to be accepted, since, the proportion of such suspicious suppliers, the respondents ought to have granted provisional refund to the extent of 90% as provided under

C/SCA/23798/2022 ORDER DATED: 03/02/2023

Section 54(6) read with Rule 91 of the CGST Rules, which the respondents failed to do. Further, it is also to be seen that in the verification report submitted with regard to L1 suppliers submitted by the jurisdictional authorities to the 5th respondent, none of the L1 suppliers of the petitioner, from whom it had purchased goods by paying applicable taxes under the GST law, are found to be suspicious. If the suppliers of the petitioner are found to be genuine, the petitioner is entitled to claim credit of the taxes paid on such purchases effected."

11. Considering the provisions of law and the

judgment referred to above of the Telangana High Court

in connection with the facts of the present case, we

allow this petition partly. The respondents-authorities are directed to grant the amount of IGST refund to the

petitioner, as claimed by the petitioner as provided

under Section 54(6) of the CGST Act r/w Rule 91 of the

CGST Rules and credit such amount to the petitioner's

account within a period of three weeks from the date of

receipt of copy of this order.

(SONIA GOKANI, J)

(SANDEEP N. BHATT,J) SRILATHA