Rejection of a partial refund under the Budgetary Support Scheme without assigning any reasons is invalid in law

The Hon’ble Jammu & Kashmir and Ladakh High Court at Jammu in J & K Cement Corporation v. Union of India [WP(C) No. 2188 of 2022, dated April 04, 2025] held that the rejection of a partial refund claim under the Budgetary Support Scheme (“the Scheme”) without assigning any reason was unjustified. Further, the Court held that the Petitioner was eligible under the Notification No.F.No.10(1)2017-DBA-II/NER dated November 05, 2017 (“the Notification”) and had correctly calculated the refund based on 58% of Central Goods & Services Tax (“CGST”)/State Goods & Services Tax (“SGST”) and 29% of Integrated Goods & Services (“IGST”) paid on the inter-state supplies.

Facts:

M/s. J&K Cement Corporation (“the Petitioner”) is an industrial unit engaged in the manufacturing and supply of cement across the country. The Petitioner was availing the benefit of excise duty refund under Notification No. 1/2010-C.E. dated February 06, 2010 before the introduction of the Central Goods and Services Tax, Act 2017 (“the CGST Act”). Post, CGST Act, the Petitioner became eligible for benefits under the Scheme.

The Petitioner filed refund claims under the Scheme for the periods July–September 2021 and January–March 2022. While the claim for July–September 2021 was allowed, the refund for January–March 2022 was partially rejected by the Deputy Commissioner (“the Respondent”) by passing Refund Order (“the Impugned Order”) without any justification.

The Petitioner contended that they were the eligible unit to take the benefit of budgetary scheme and filed refund claims for the said quarter based on the Scheme and the Notification which allows 58% of the CGST/CGST and 29% of the IGST paid in cash after utilizing Input Tax Credit (“ITC”).

Hence, aggrieved by the Impugned Order, the Petitioner filed the present Writ Petition.

Issue:

Whether the rejection of a partial refund under the Scheme without assigning any reasons is valid in law?

Held:

The Hon’ble Jammu & Kashmir and Ladakh High Court in WP(C) No. 2188 of 2022 held as under:

• Observed that, from a reading of paragraph No.5 of the Notification in its entirety, it clearly comes out that the amount of budgetary support to be released in favour of an eligible unit is required to be determined in the following manner: –
• 58% of CGST paid through debit in the cash ledger account provided such tax through debit in cash ledger is paid after utilization of the ITC of the central tax and integrated tax.
• 29% of IGST paid through debit in cash ledger account provided such amount in cash is paid after utilization of the ITC of central tax and integrated tax.
• The CGST/IGST to be taken into account should be as paid on value addition prescribed in the rescinded exemption notifications.
• That the refund claim on account of budgetary support under the Notification shall not exceed the GST paid on value addition.
• Noted that, as per the Scheme, the amount which would be payable to the Petitioner on account of budgetary support would be 58% of the amount of CGST paid in cash and in the Petitioner’s case, the CGST on value addition would be 75% of the total amount of CGST paid for the quarter January, 2022 to March, 2022 (Chapter 25 of Table of Excise Notification No.1/2010-C.E. dated February 06, 2010), which, in any case, is exceeding the refund claim.
• Emphasized that, there is no error or mistake committed by the Petitioner claiming a refund. Further observed that there is no good reason emerging from the Impugned Order passed by Respondent to justify the rejection of claim of the Petitioner which the Respondent has held to be an amount inadmissible on account of budgetary support. Further, noted that the Respondents did not explain the manner in which the amount of budgetary support payable to the Petitioner was calculated.
• Held that, the Petitioner was entitled to refund on account of reimbursement of budgetary support for the CGST paid for the quarter January, 2022 to March, 2022 and the rejection of partial claim in respect of quarter January, 2022-March, 2022 by the Respondent is held bad and contrary to the Notification. Directed the Respondent to take steps for release of the amount held inadmissible by it.

Our Comments:

Section 54 of the CGST Act governs “Refund of Tax”. Further, Section 54(1) of the CGST Act mentions that, any person claiming a refund of tax, interest, penalty, or any other amount may apply to the proper officer within two years from the relevant date.

In a pari materia case of Shiva Industries v. Union of India [W.P.(C) No. 2159 of 2022 dated April 04, 2025], the Hon’ble High Court of Jammu & Kashmir and Ladakh set aside the Impugned Order rejecting part of the Petitioner’s refund claim under the Budgetary Support Scheme. The Court held that the rejection was contrary to the Notification as the Petitioner was entitled to budgetary support based on specific percentages of CGST/SGST and IGST paid in cash. Further, the Court directed the release of the withheld refund and emphasized adherence to proper calculation methods.

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