The Bombay High Court has recently addressed a case involving the Goods and Services Tax (GST) where the court had previously directed the authorities to issue a refund to the assessee. However, a subsequent show cause notice (SCN) was issued by the department seeking to reject the refund claim. This situation arose because the earlier order of the court was under review. The High Court’s decision clarified that until the review application is decided, the authorities should refrain from any further actions based on the show cause notice.
In detail, the respondent authorities were initially instructed by the court to refund an appropriate amount to the assessee, retaining only 10% as a pre-deposit for filing a statutory appeal. The petitioner’s counsel raised concerns that the Deputy Commissioner of State Tax was attempting to nullify this order by issuing a show cause notice questioning why the refund claim should not be rejected. This move was seen as contradicting the court’s clear directives.
The court was informed that the department filed an interim application for a review, modification, or clarification of the order mandating the refund. The department presented reasons for needing a review or modification of this order. The court decided that the petitioner’s grievances raised in the writ petition could only be properly addressed after the department’s review application was resolved. Until then, the Deputy Commissioner of State Tax is instructed not to proceed with actions based on the show cause notice issued to the petitioner.
This case falls under Section 54 of the Central Goods and Services Tax Act, 2017, and the Maharashtra Goods and Services Tax Act, 2017, along with Rule 96 of the Central Goods and Services Tax Rules, 2017, and the Maharashtra Goods and Services Tax Rules, 2017.
It’s important to note that the decision partially favors the assessee. The court also allowed the petitioner to apply for the writ petition to be considered alongside the department’s review application. Furthermore, the court stated that this order does not prevent the department from restoring the position regarding the input tax credit as directed in the original order.
The High Court’s decision emphasizes the importance of judicial review in administrative actions, especially in complex tax matters like GST refunds. It also underscores the necessity for authorities to adhere to judicial orders unless a successful review or modification is obtained.
Point-wise breakdown of the Bombay High Court’s decision in this context:-
- Background of the Case:
- This case involves a dispute over a GST refund.
- The High Court had earlier directed the tax authorities to issue a refund to the assessee.
- Issuance of Show Cause Notice (SCN):
- Despite the court’s order, the Deputy Commissioner of State Tax issued a SCN to the assessee, questioning the validity of the refund claim.
- This action was taken because the court’s order was under review.
- Applicable Legal Provisions:
- The case primarily falls under Section 54 of the Central Goods and Services Tax Act, 2017, and the corresponding provisions of the Maharashtra Goods and Services Tax Act, 2017.
- The dispute also relates to Rule 96 of the Central Goods and Services Tax Rules, 2017, and the Maharashtra Goods and Services Tax Rules, 2017, which govern the refund process.
- Court’s Earlier Directive for Refund:
- The court had instructed the authorities to refund an appropriate amount to the assessee, holding back only 10% for a pre-deposit for filing a statutory appeal.
- Contentions in the Show Cause Notice:
- The SCN questioned the refund claim, implying a potential rejection of the claim.
- The reasons provided in the SCN were related to an Interlocutory Appeal filed for clarification on the court’s earlier order.
- Department’s Review Application:
- The department filed an interim application for a review, modification, or clarification of the court’s earlier refund order.
- This application cited reasons necessitating a review or modification.
- Court’s Decision on the Review Application and SCN:
- The court held that the issues raised in the writ petition by the petitioner could only be addressed after deciding on the department’s review application.
- The Deputy Commissioner of State Tax was instructed not to take further action under the SCN during this period.
- Liberty to Tag Writ Petition with Review Application:
- The court allowed the petitioner to move for the writ petition to be considered along with the department’s review application.
- Restoration of Input Tax Credit:
- The court clarified that its order does not restrict the department from restoring the position regarding the input tax credit as directed in the original order.
- Liberty to Apply:
- The court granted liberty to the parties involved to apply as needed in relation to the case.
