ITC

High Court allows refund of ITC reversed when Tax is paid by the Supplier`

The Hon’ble Delhi High Court in the case of Pedersen Consultants India Pvt. Ltd. v. Union of India and Ors. [W.P. (C) 1039/2024 dated March 19, 2024] disposed of the writ petition, thereby allowing the registered person to file refund application for the Input Tax Credit (“ITC”) reversed when subsequently returns have been filed and taxes have been paid by the Supplier.

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Facts:

Pedersen Consultants India Pvt. Ltd. (“the Petitioner”) has filed a writ petition seeking direction that the benefit of ITC should be granted to the Petitioner on the invoices in relation to which the returns have been filed and taxes have been paid by the supplier.

The Petitioner contends that the Petitioner has been coerced into depositing the tax on the invoice by the Revenue Department (“the Respondent”) in relation to which the Supplier has not filed the return within time for which subsequently, returns have been filed and taxes have been paid by the Supplier. The Petitioner further states that, the aforesaid situation would lead to double taxation, therefore, the Petitioner seeks refund of the amount that the Petitioner was coerced to deposit on the invoices.

The Petitioner, in response to the objection raised states that the Petitioner would file an application under Section 54 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”). The Petitioner relying upon the Notification No. 13/2022 dated July 05, 2022 (“the Notification”), also contends that, the period between March 1, 2020 to February 28, 2023 be excluded for the purpose of limitation for filing refund application. The Petitioner further contends that, period between filing of writ petition till the passing of order be also excluded.

Held:

The Hon’ble Delhi High Court in the WP (C) 1039/2024 disposed of the writ petition, thereby permitting the Petitioner to file the refund application as mandated by Section 54 of the CGST Act, and the Respondent is required to adjudicate the claim of the Petitioner in accordance with law taking into consideration the fact that, the Petitioner would fall within the purview of Notification wherein the time period from March 1, 2020 to February 28, 2022 would be excluded for computation of period of limitation for filing refund application.

Our Comment:

As per sub-section (2) of Section 41 of the CGST Act, the registered person is required to reverse the ITC availed, wherein the tax has not been paid by the supplier with effect from October 1, 2022. However, the said provision was prospectively applicable, and therefore, the registered person cannot be coerced or forced to reverse the ITC availed in relation to past period in case where the supplier has not filed the required returns and has not paid the taxes. Also, as per Section 73 and Section 74 of the CGST Act, the tax demand can be raised from the person who is obligated to pay the tax i.e. supplier. Further, the aforesaid situation would lead to double taxation wherein the ITC is reversed by the registered person during the proceedings for non-payment of tax by the Supplier to the Government which is subsequently paid by the Supplier.

(Author can be reached at [email protected])

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose and for the reader’s personal non-commercial use. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon. Further, no portion of our article or newsletter should be used for any purpose(s) unless authorized in writing and we reserve a legal right for any infringement on usage of our article or newsletter without prior permission.

CA Bimal Jain
A2Z Taxcorp LLP is a boutique Indirect Tax firm having its offices at New Delhi and Guwahati specializing in GST, Central Excise, Custom, Service Tax, VAT, DGFT, Foreign Trade Policy, SEZ, EOU, Export – Import Laws, Free Trade Policy, etc. It is a professionally managed firm having a team of experienced and distinguished Chartered Accountants, Company Secretary, Lawyers, Corporate Financial Advisors and Tax consultants to provide various services like litigation and representation, transaction advisory, diagnostic reviews/ health checks, audit defense & protection, retainership & compliance, configuration of tax efficient business model etc. Its clientele consists mainly of Foreign MNC, large/mid-sized Indian companies which includes exporters, FMCG, consumer durables, automobiles, aerated beverages, ceramic tiles, real-estate, hospitality, etc. Our clients include Varun Beverages Limited, Kajaria Ceramics Limited, L.G. Electronics India Private Limited, Shipra Hotel Limited, Multani Pharmaceuticals Limited, Shangri-La Eros Hotel etc. Flat No. 34B, Ground Floor, Pocket - 1, Mayur Vihar, Phase–I, Delhi – 110091 India Desktel:+91-11-42427056 Mobile:+91 8076563802 [email protected] www.a2ztaxcorp.com
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