Uttarakhand High Court Stays Circular Restricting Filing Of GST Refund For Tax Periods Spread Across Two Financial Years In Chronological Order

The Uttarakhand High Court has stayed the operation of a Circular issued by the Revenue Authorities, to the extent it inhibits refund claims for a period of two separate (not successive) financial years and requires filing of Refund in a chronological manner.

The Bench comprising of Justices Sanjaya Kumar Mishra and Alok Kumar Verma has stayed para 8 of the Circular No. 125/44//2019-GST dated 18.11.2019, which states thus:

“8. The applicant, at his option, may file a refund claim for a tax period or by clubbing successive tax periods. The period for which a refund claim has been filed, however, cannot spread across different financial years. Registered persons having aggregate turnover of up to Rs. 1.5 crore in the preceding financial year or the current financial year opting to file FORM GSTR-1 on a quarterly basis, can only apply for a refund on a quarterly basis or clubbing successive quarters as aforesaid. However, refund claims under categories listed at (a), (c) and (e) in para 3 above must be filed by the applicant chronologically. This means that an applicant, after submitting a refund application under any of these categories for a certain period, shall not be subsequently allowed to file a refund claim under the same category for any previous period. This principle / limitation, however, shall not apply in cases where a fresh application is being filed pursuant to a deficiency memo having been issued earlier.”

The Petitioner had moved the High Court challenging the condition of filing of Refund in a chronological manner.

It referred to the decision of the Delhi High Court in M/s Pitambra Books Pvt. Ltd Vs. Union of India & Ors., whereby the Circular, to the extent of para 8, was stayed as prima facie arbitrary.

The plea before Delhi High Court was moved by an exporter-petitioner, asserting that its rights under Article 286(1) of the Constitution read with Section 16 of the Integrated Goods and Services Act, 2017 and Section 54 of the Central Goods and Services Tax Act were adversely affected. It was claimed that the Circular deprived of the benefit of availing refund claim of the unutilised input tax credit for the period from April, 2018 to June, 2018.

The Delhi High Court, finding substance in the submission, had observed,

“In the instant case, where exports are not made in the same financial year, the question arises as to whether Respondents can restrict the filing of the refund for tax periods spread across two financial years and deprive the Petitioner of its valuable right accrued in his favour. In exports, the availability of the rotation of funds is essential for the business to thrive. Moreover, businesses do not run according to the whims of the executive authorities. The business world cannot be told when to place orders for exports; when to manufacture the goods for export; and; when to actually undertake the exports. Respondents’ impugned circulars have thus blocked the capital of the Petitioner and the unutilised ITC, and it has accumulated a huge amount of unutilised ITC to the tune of Rs.30 crores”.

The bar posed by the Circulars was deemed to deprive the Petitioner’s right to the incentives offered under the law for earning valuable foreign exchange for the country and it was held that the Respondents cannot artificially deny the benefits conferred by substantive laws.

Accordingly, the rigors of Para 8 of the 2019 Circular were stayed.

Relying on the aforesaid ruling, the Petitioner had urged the Uttarakhand High Court to stay the impugned Circular.

The High Court has posted the matter for hearing on March 10. In the interregnum, it has directed that the effect and operation of the rigour of paragraph 8 of the Circular No. 125/44//2019 dated 18.11.2019 shall remain stayed.


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