The CBIC had earlier issued a Circular No. 37/11/2018-GST F.No.349/47/2017- GST Dated 15th March, 2018 in pursuant to representations received from the traders regarding the issue being faced by them in claiming refund of exports in cases where refund period has been spread across different months and different financial years. Therefore, considering the issues of the traders the CBIC issued the above mentioned Circular stating that:
“11.1 In many scenarios, exports may not have been made in that period in which the inputs or input services were received and input tax credit has been availed. Similarly, there may be cases where exports may have been made in a period but no input tax credit has been availed in the said period. The above referred rule, taking into account such scenarios, defines relevant period in the context of the refund claim and does not link it to a tax period.
11.2 In this regard, it is hereby clarified that the exporter, at his option, may file refund claim for one calendar month / quarter or by clubbing successive calendar months / quarters. The calendar month(s) / quarter(s) for which refund claim has been filed, however, cannot spread across different financial years.”
Though CBIC provided for clubbing of different months/quarters for the purpose of claiming refund spread across different months, however, the Circular imposed a restriction that “refund period cannot spread across different financial year”. The restriction imposed by the Circular has nowhere been provided under the GST Act or Rules. This restriction took away the substantive right of refund which has been provided in CGST Act/ IGST Act and CGST Rules.
Thereafter, the CBIC again issued Circular No. 125/44/2019-GST Dated 18.11.2019, superseding all the previous circulars which provided for manual filing of refund application as provided under Rule 97A of the CGST Rules, and made full electronic process for filing and processing of refund application w.e.f 26.09.2019. The Circular No. 125 (Supra) also reiterated the Para 11.2 of the Circular No. 37 (Supra) which had imposed the restriction that refund period/claim cannot spread across two financial years. The Circular No. 125 (Supra) also imposed a restriction that for filing refund claim of subsequent period, refund claim for previous period shall be filed .i.e. refund claim has to be filed chronologically.
The Petitioner, who is a manufacturer and exporter of Books which is a Zero Rated Supply as per Section 16 of the IGST Act, has accumulated unutilized credit in his electronic credit ledger. The Petitioner made purchased of raw materials from November’17 to June’18, and finally exported the goods in June’18, thereafter tried filing the refund application on the Common Portal, however due to the restriction imposed by the Circular No. 125 (Supra), i.e. the refund claim cannot be spread across two financial years, the petitioner was unable to file the refund application for the period of November’17-June’18. Thereafter, due to the second restriction of filing the refund chronologically, the petitioner was unable to file the refund application for the subsequent months and subsequent years. Thirdly due to the superseding of all the previous Circulars which provided for manual filing of refund application, and despite the Rule 97A providing for manual filing of refund application, Circular No. 125 (Supra), made the full electronic filing and processing of refund, therefore, the GST Authorities were not ready to accept the manual refund application. This has resulted in the blockage of unutilised input tax credit accumulated in the credit ledger of the Petitioner, which the petitioner was unable to claim refund.
Therefore, the Petitioner approached the Hon’ble High Court by filing the Writ Petitioner No. W.P(C) 627/2020 and prayed interim relief for Staying the Para 8 of the Circular No. 125 (Supra) and for filing of manual refund application for all the periods.
The Hon’ble High Court heard the arguments of Advocates for Petitioner’s Puneet Agrawal and Yuvraj Singh, and passed an order Staying the Para 8 of the Circular No. 125 (Supra) and granted interim relief to the Petitioner to file manual refund application for all the periods starting from November’17. The Hon’ble High Court in the order also directed the Respondents to entertain the manual refund application of the Petitioner.
The impact of the Hon’ble High Court’s verdict is that now the restriction that refund period cannot be spread across two financial years and that refund period has to be filed in chronological order, is no more maintainable and therefore assessee can file refund claim which spread across two financial years and for any period.
The order is attached here.