Refund in GST: One Supplier's Mistake Shouldn't Define All

In the High Court of Delhi, a case (Solidum And Stars Guild LLP Vs. Commissioner, Central Tax, Appeals-II, Delhi, & Anr.) involving the rejection of a petitioner's application for refund of Input Tax Credit (ITC) amounting to Rs.76,76,106/- (CGST – Rs.38,38,053/- and SGST – Rs.38,38,053/-) was presented.

ADJUDICATING AUTHORITY’S GROUNDS OF REJECTION

• • Non-existent suppliers
• • Mismatch in invoice and FOB values

FACT OF THE CASE:

In a recent case heard in the High Court of Delhi, the matter of refund of Input Tax Credit (ITC) came under scrutiny. The petitioner's claim for a refund of Rs.76,76,106/- (CGST – Rs.38,38,053/- and SGST – Rs.38,38,053/-) was rejected by the Adjudicating Authority, citing non-existent suppliers and discrepancies in invoice values. The petitioner appealed against this decision.

The petitioner's claim was rejected primarily due to the identification of certain suppliers as non-existent by the jurisdictional CGST authorities. Additionally, there was a mismatch between invoice values and FOB (Free On Board) values. The rejection centred on the assertion that the purchases made from these suppliers were not genuine due to the reported non-existence of the suppliers.

PETITIONER'S RESPONSE:

The petitioner submitted detailed information regarding all the vendors, including their respective GSTIN and invoice particulars. The petitioner, inter alia, claimed that the purchases made were genuine from dealers that were registered.

APPEAL AND REJECTION:

The petitioner's appeal under Section 107 of the Central Goods and Services Tax Act, 2017, was rejected by the Appellate Authority. The Appellate Authority's decision was based on its finding that invoices related to 'M/s Siddhi Impex' were non-existent and that the ITC claimed for these invoices was an attempt to claim refunds fraudulently.

KEY CONSIDERATION OF THE CASE:

• • The rejection specifically concerned 'M/s Siddhi Impex,' a supplier found to be non-existent upon physical verification.
• • The Appellate Authority acknowledged that the ITC claimed for 'M/s Siddhi Impex' was fraudulent due to the supplier's non-existence.
• • The petitioner voluntarily deposited the disputed amount of Rs.21,76,260/- related to 'M/s Siddhi Impex' in their electronic credit ledger.
• • The petitioner's appeal against the rejection was focused on the legitimacy of other suppliers.
• • The petitioner's appeal was accepted in part, as the court found no irregularities or doubts regarding other suppliers' supplies and ITC claims.

DECISION OF DELHI HIGH COURT:

The court allowed the petitioner's claim for ITC refund related to suppliers other than 'M/s Siddhi Impex.' The court set aside the impugned orders to the extent of this refund, directing the Adjudicating Authority to process the petitioner's claim of Rs.54,99,846/- along with interest within four weeks.

The case highlights the importance of verifying supplier legitimacy and accurate documentation for ITC claims, emphasizing that one non-existent supplier should not result in the rejection of refunds for other legitimate transactions.

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