2026-VIL-134-GSTAT-RPR
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  2. 2026-VIL-134-GSTAT-RPR

SGST Tribunal

GST - Erroneous refund of unutilised input tax credit, Proceeding under Section 73 of the CGST Act, 2017 - Refund of unutilised input tax credit was sanctioned to the Appellant under Section 54(3) on account of inverted duty structure - Proceedings under Section 73 were subsequently initiated treating the said amount as erroneously refunded upon application of the substituted Rule 89(5) formula - Appellant contending that Section 73(1) separately refers to tax erroneously refunded and to input tax credit wrongly availed or utilised, but does not expressly use the words input tax credit erroneously refunded - Whether a monetary refund originating from accumulated input tax credit is capable of being treated as tax erroneously refunded for the purposes of Section 73(1) - HELD - Section 54(3) contemplates a statutory refund of unutilised input tax credit, and when such credit is converted, on the claimant's application, into a monetary payment under Section 54, the transaction is a refund. If the amount so paid exceeds what Section 54 read with Rule 89(5) permits, it is capable of answering the statutory description erroneously refunded - To exclude every Section 54(3) cash refund merely because its source is input tax credit would leave a substantial class of statutory refunds outside the express erroneous refund limb without any language in the Act requiring such exclusion - The absence of the exact phrase input tax credit erroneously refunded cannot nullify the first limb of Section 73 when a monetary refund has in fact been made - The refund is held capable in law of being treated as an erroneous refund under Section 73 notwithstanding that its source was accumulated input tax credit – The appeal is dismissed - Jurisdiction under Section 73 of the CGST Act, 2017 notwithstanding a subsisting refund order - The refund sanction order passed after examination of the refund claim and consideration of the Appellant's reply, and was not challenged by the Department - Appellant contended that the order, having attained finality in absence thereof, could not be collaterally nullified through proceedings under Section 73 - Whether proceedings under Section 73 are without jurisdiction merely because the refund sanction order had not first been reversed through Departmental appeal or revision - HELD - Section 73 is a substantive statutory provision enacted specifically for determination of tax erroneously refunded, and neither Section 107(2), Section 108 nor Section 73 contains language making Section 73 jurisdiction conditional upon prior departmental appeal or revision of the refund order, the provisions operating in related but distinct fields - Departmental appeal or revision tests the legality or propriety of the refund order as an order, whereas Section 73 provides demand and determination machinery for amounts erroneously refunded, subject to its own notice, adjudication and limitation safeguards - An executive instruction prescribing review of refund orders cannot read into Section 73 an additional jurisdictional condition which the legislature has not expressed - Non-invocation of Section 107(2) or Section 108 did not, by itself, oust the jurisdiction of the proper officer under Section 73 in the facts of the present case - Survival of controversy regarding the principal refund amount computed under Rule 89(5) of the CGST Rules, 2017 - The refund authority had rejected the larger part of the claim on account of input service and capital goods credit and sanctioned only a residual amount - Department subsequently took the view that upon restricting net input tax credit to eligible input goods credit and applying the complete Rule 89(5) formula, the maximum refund worked out to a negative figure - Appellant having repaid the entire sanctioned amount during pendency of the Section 73 proceedings and quantified only the consequential interest as the amount in dispute in the present appeal - Whether any controversy survives as to the principal refund entitlement under Rule 89(5), having regard to repayment of the sanctioned amount and absence of any competing computation from the Appellant - HELD - The validity of Rule 89(5), confining net input tax credit to input goods credit for the inverted duty refund formula, stands upheld by binding precedent in VKC Footsteps declaring the operation of an existing Rule already effective prior to the refund application and sanction - The computation recorded in the impugned proceedings has not been displaced by any alternative computation from the Appellant - A general prayer for setting aside the impugned order cannot, in the absence of a corresponding challenge to and quantified claim concerning the principal amount, enlarge the subject matter of the appeal into a claim for restitution which has not been made - No subsisting claim for restoration of the principal amount survives, and the controversy is confined to whether the demand of interest is legally and arithmetically sustainable - Levy and computation of interest under Section 50 read with Section 73 of the CGST Act, 2017 on an erroneous refund - Whether Section 73 read with Section 50 supplies substantive statutory authority to levy interest on an erroneous refund - HELD - Section 73(1), (5), (8) and (9) repeatedly and expressly link the amount erroneously refunded with interest payable under Section 50, forming an integral part of the statutory scheme governing determination and recovery, and liability to interest does not depend upon identifying fault. Section 73 being the provision applicable where the erroneous refund is for reasons other than fraud, wilful misstatement or suppression of facts - The substituted Rule 89(5) had already been made operative from a date prior to the refund application and sanction, and its subsequent judicial affirmation did not create a new retrospective liability but declared the operation of an already existing Rule. The later inserted Rule on manner of calculation of interest being incapable of creating or extinguishing a charge already existing in the Act - The dates governing computation being admitted, no specific error in the applicable rate or arithmetic of the interest demand has been established, and Sections 73 and 50, read together, provide statutory authority for interest on an erroneous refund - The appeal is dismissed
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