Issue:

Refund Applications were not rejected on the ground that the petitioner the supplier from whom the petitioner had purchased the goods had allegedly received fake invoices from its supplier

Facts of the case:

1. The Assessee has filed the refund application dated 11.09.2020 vide Form No. GST- RFD-01 for unutilized Input Tax Credit (hereafter ‘ITC’) of INR 72,03,961/- comprising of IGST INR 19,53,062/- and Cess of INR 52,50,899/-.
2. Another refund application filed by the assessee dated 12.09.2020 against the unutilized ITC of INR 12,40,270/- comprising of IGST of INR 3,37,174/- and Cess amounting to INR 9,03,096/- in respect of goods exported.
3. In response of the first refund application, Respondent No. 2 (Department) issued a deficiency memo dated 21.09.2020 by stating that the supporting documents are not uploaded on GST Portal. Hence, accordingly filed another refund application dated 23.09.2020 along with all the required documents and same received acknowledgement vide dated 1.10.2020.
4. In respect of second refund application filed dated 12.09.2020, Respondent no. 2 issued the acknowledgement through RFD-02 as on dated 27.09.2020.
5. A search was conducted by the CGST officers (Respondent no. 1) on the premises of Assessee dated 21.10.2020. The summon was issued to the assessee vide dated 23.10.2020 for furnishing the documents and the same assessee produced documents before Respondent No. 1. Another Summon was served to the Assessee on dated 28.12.2020 for documents which the assessee already submitted.
6. The refund application was rejected by the Respondent no. 2 by the issuance of SCN dated 04.06.2021 by indicating the legitimacy and genuineness of the exports of goods from whom the purchase was made and the same was responded by the assessee to respondent no. 2on dated 12.06.2021.
7. Personal hearing was conducted on dated 01.07.2021 before Respondent no. 2. During the PH, the assessee submitted all the supporting documents in respect of the refund claim and also stated that he was not aware of any allegation against its supplier as the purchase and invoice were genuine also cited Calcutta High Court case with his submission.
8. Respondent no. 2 passed an order dated 02.07.2021 by rejecting the refund application on the same ground as stated in the SCN and did not consider the personal hearing submission.
9. Aggrieved by the said order, an appeal has been filed before the Appellate Authority which was rejected by stating that the supply was made by goodless supply on the strength of fake invoices without finding any cogent material and confirming the order the Respondent no. 2.
10. This present writ petition has been filed by the Assessee before Delhi High Court against the order passed by the Appellate Authority (Commissioner Appeal) on dated 31.03.2022, whereby two separate appeals were dismissed in respect of the refund application filed dated 11.09.2020 and 12.09.2020.

Ruling:

• Hon’ble Court observed that the refund application has been rejected without any cogent material. There is no dispute that goods have been exported as it was confirmed that the said invoices issued by the supplier are reflected in the AIO System which proves that these invoices are not fake. Hence, the supplier is a registered person under GST law and paid all the taxes including cess. Thus, the refund application cannot be denied on the default of a third person.
• The court also stated that the allegations of any fake credit availed by a supplier cannot be a ground for rejecting the refund applications of the assessee unless it proves that the assessee has not received the goods or paid for them.
• The court directed Respondent no. 2 to process the refund application of ITC including Cess in respect of the export of goods.
• It is also stated by the Hon’ble Court that it is open to the respondents to take any action if required against the non-supply of any goods by the supplier of the Assessee.

MyGST Refund Comment: Where there is no fault of the Assessee on the part of the payment of Tax to his supplier and the genuineness of the export of goods, the refund claim cannot be rejected merely on the fake invoice issued by the supplier. The allegation of any fake invoice of his supplier shall not be effected on the part of the Assessee.

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