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Refund of GST allowed even if allegations of fake credit availed by supplier

M/S BALAJI EXIM Vs COMMISSIONER, CGST AND ORS. [W.P.(C) 10407/2022 & W.P.(C) 10423/2022]

Recently in case of M/S BALAJI EXIM Vs COMMISSIONER, CGST AND ORS. [W.P.(C) 10407/2022 & W.P.(C) 10423/2022] it is held that the allegations of any fake credit availed by petitioner’s supplier cannot be a ground for rejecting the petitioner’s refund applications unless it is established that the petitioner has not received the goods or paid for them.

The brief details about the case are given hereunder:

The petitioner, M/s Balaji Exim, had filed its refund application dated 11.09.2020 (in Form – GST-RFD – 01) seeking refund of the unutilized Input Tax Credit (hereafter ‘ITC’) amounting to ₹72,03,961/-, which comprised of Integrated Goods and Service Tax amounting to ₹19,53,062/- and Cess of ₹52,50,899/-.

The petitioner also filed another refund application dated 12.09.2020 (in Form GST-RFD – 01) claiming refund of ITC of ₹12,40,270/- comprising of IGST of ₹3,37,174/- and Cess amounting to ₹9,03,096/-. The refund sought was in respect of goods exported by the petitioner.

The petitioner’s applications for the refund were rejected on the ground that the supplier from whom the petitioner had purchased the goods had allegedly received fake invoices from its suppliers.

Aggrieved by the rejection order, petitioner filed the appeal before Appellate Authority, but no relief was given to them. Therefore, petitioner filed the appeal before Delhi High Court.

Hon’ble Delhi High Court in the above case has observed the petitioner’s refund applications have been rejected merely because of suspicion without any cogent material. There is no dispute that goods have been exported; the invoices in respect of which the petitioner claims the ITC were raised by a registered dealer; and, there is no allegation that the petitioner has not paid the invoices, which include taxes. Thus, the applications for refund cannot be denied.

It was held in the instant case that the allegations of any fake credit availed by M/s Shruti Exports cannot be a ground for rejecting the petitioner’s refund applications unless it is established that the petitioner has not received the goods or paid for them.

In view of the above, the petitioner would be entitled to the refund of the ITC on goods that have been exported by it. The present petitions are, accordingly, allowed. and the respondents are directed to forthwith process the petitioner’s applications for refund of the ITC including Cess.

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