No Docs, No Refund: Exporter’s GST ITC Claim Dismissed for Lack of Evidence

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Case Name

M/s CTC (India) Private Limited vs. Commissioner (Appeals), Central Goods and Services Tax and Central Excise & Others

Court Name: High Court of Jharkhand at Ranchi

Case No.: W.P.(T) No. 1031 of 2021

Date of Order: 07th September 2022

Coram: Hon’ble Mr. Justice Aparesh Kumar Singh & Hon’ble Mr. Justice Deepak Roshan

Key Takeaways

1. GSTR-3B is a self-declaration and carries significant weight — An error in GSTR-3B (even if inadvertent) can seriously jeopardize your refund claim if not corrected and supported by evidence.

2. Documentary evidence is non-negotiable for refund claims — Simply claiming a refund through averments (statements) is not enough. You must back it up with invoices and other corroborative documents.

3. Consistency between GSTR-1 and GSTR-3B matters — A mismatch between the two returns raises red flags and can lead to rejection of refund claims.

4. Natural justice was not violated — The court confirmed that a personal hearing was indeed granted and attended, so the company’s argument about denial of natural justice did not hold up.

5. Circular No. 37/11/2018-GST dated 15.3.2018 is relevant — Refund claims for export of goods without payment of tax require verification of invoices.

6. Even the High Court stage is not a second chance to produce evidence — The petitioner failed to produce documentary evidence even before the High Court, which further weakened their case.

Issue

Can a GST refund claim for accumulated ITC on zero-rated (export) supplies be allowed when the taxpayer’s own GSTR-3B return shows the value of zero-rated supplies as “zero,” and the taxpayer fails to produce documentary evidence to substantiate the actual export supplies?

The short answer the court gave: No, it cannot.

Facts

Who is the Petitioner?

M/s CTC (India) Private Limited is a company registered under the Companies Act, 1956, and is a 100% Export Oriented Unit (EOU) based in Jamshedpur. It exports products to countries like the USA, China, Germany, and others.

What did they do?

• They filed an application for a refund of accumulated CGST, SGST, and IGST credit for January 2018, amounting to ₹9,89,191, using the prescribed Form GST-RFD-01A along with supporting documents.

What went wrong?

• When filing the GSTR-3B return for January 2018, the company inadvertently entered “zero” against the outward taxable supplies (zero-rated) column, instead of the correct figure of ₹3,79,82,605/-.
• However, the correct figure was mentioned in the GSTR-1 return against export invoices.

What happened next?

DateEvent13.12.2018Petitioner filed refund application04.01.2019Respondent No. 3 issued a Show Cause Notice for rejection of refund29.01.2019Petitioner filed a detailed reply to the SCN31.01.2019Personal hearing conducted (attended by Sri P.K. Choudhary and Sri Gurtej Singh)07.02.2019Adjudicating authority passed rejection order in Form GST-RFD-062020Petitioner filed appeal (Appeal No. 29/CGST/JSR/2020)29.10.2020Appellate authority rejected the appeal03.12.2020Rejection order communicated to petitioner2021Petitioner filed W.P.(T) No. 1031 of 2021 before the High Court07.09.2022High Court dismissed the writ petition

Arguments

Petitioner’s Arguments (M/s CTC India Pvt. Ltd.)

1. Inadvertent Error in GSTR-3B: The zero-rated supply value was accidentally entered as “zero” in GSTR-3B, but the correct value of ₹3,79,82,605/- was properly reflected in GSTR-1.

2. Wrong Application of Rule 89(4): The respondents failed to consider that the definition of “adjusted total turnover” under Rule 89(4) of the Central Goods and Services Tax Rules, 2017 specifically excludes exempted supplies, and the petitioner’s claim falls under exempt supplies as per Section 2(47) of the Central Goods and Services Tax Act, 2017.

3. Denial of Natural Justice: The petitioner argued that the rejection order was passed without considering their explanation and without providing an opportunity of personal hearing.

4. Partial Acceptance Requested: In their reply to the SCN, the petitioner had themselves stated that:

• Items at Sl. No. 1-3 (parts for maintenance of Plant & Machinery used in production) — CGST and SGST credit of ₹2,489.22 should be allowed
• Items at Sl. No. 4-6 and 9 — may be rejected
• This shows the petitioner was being reasonable and transparent.

5. Prayer: Quashing of the rejection order dated 07.02.2019 and the appellate order dated 29.10.2020, and a direction for refund of ₹9,89,191.

Respondents’ Arguments (CGST & Central Excise Authorities)

1. GSTR-3B Shows Zero: The refund amount is calculated based on a formula, and since the value of zero-rated supply in GSTR-3B for January 2018 is zero, the refund amount also works out to zero.

2. Personal Hearing Was Granted: A personal hearing was conducted on 31.01.2019, which was duly attended by Sri P.K. Choudhary and Sri Gurtej Singh on behalf of the assessee. So the natural justice argument is baseless.

3. Section 17(5) of CGST Act, 2017: Invoices at point nos. 2(1), 2(2), 2(3), 2(7), and 2(8) were considered, but refund of credit was not admissible in terms of Section 17(5) of the CGST Act, 2017 (which deals with blocked credits).

4. No Supporting Documents: The GSTR-3B is a self-assessment/declaration, and the petitioner did not corroborate their claim with corresponding invoices. The refund was rightly rejected in the absence of supporting documents.

5. Circular No. 37/11/2018-GST dated 15.3.2018: The appellate authority correctly applied this circular, which states that refund claims for export of goods without payment of tax are possible only on verification of invoices.

Key Legal Precedents & Provisions

The judgment references the following legal provisions (note: no prior case laws were cited, only statutory provisions and a circular):

1. Rule 89(4) of the Central Goods and Services Tax Rules, 2017

• This rule provides the formula for calculating the refund of unutilized ITC on account of zero-rated supplies.
• The petitioner argued that the definition of “adjusted total turnover” under this rule excludes exempted supplies.
• The respondents used this formula to show that since GSTR-3B showed zero-rated supply as zero, the refund amount computed by the formula also comes to zero.

2. Section 2(47) of the Central Goods and Services Tax Act, 2017

• This section defines “exempt supply”.
• The petitioner argued that their claim falls under exempt supplies as defined here, and therefore the formula under Rule 89(4) should have excluded it from the denominator.

3. Section 17(5) of the Central Goods and Services Tax Act, 2017

• This section deals with “blocked credits” — i.e., ITC that is specifically not available even if GST was paid on the inputs.
• The respondents used this to reject credit on certain invoices (point nos. 2(1), 2(2), 2(3), 2(7), and 2(8)).

4. Circular No. 37/11/2018-GST dated 15.3.2018

• This is a CBIC circular related to refund claims on account of export of goods without payment of tax.
• It mandates that such refund claims are valid only on verification of invoices.
• The appellate authority relied on this circular to uphold the rejection.

Judgment

The Respondents (Tax Authorities) won. The High Court dismissed the writ petition filed by M/s CTC (India) Private Limited.

What Did the Court Decide?

The court, after hearing both sides and reviewing all documents, made the following key findings:

1. No Documentary Evidence Produced:

The court found that the petitioner failed to produce any documentary evidence to support their refund claim — not before the adjudicating authority, not before the appellate authority, and not even before the High Court.

2. Mere Averments Are Not Enough:

The court clearly stated:

“The law is very clear that merely claiming any refund on the basis of averments would not suffice unless and until the said claim of any assesse is corroborated by documentary evidence.”

3. Zero-Rated Supply Not Substantiated:

The petitioner could not provide corroborative evidence to substantiate its claim of zero-rated supply so that the claim could be validated.

4. Natural Justice Was Not Violated:

The court rejected the petitioner’s argument about denial of natural justice, noting that a personal hearing was indeed conducted on 31.01.2019 and was attended by the assessee’s representatives.

5. Appellate Authority’s Findings Upheld:

The court upheld the appellate authority’s finding that the application for refund of unutilized ITC on account of zero-rated supplies must be accompanied by documentary evidence to establish that the refund is genuinely due.

Final Order

“Having regard to the facts of the case and the discussion made hereinabove, we refrain to interfere with the impugned orders. Consequently, the instant writ application is dismissed on contest.”

FAQs

Q1. Why did the company lose the case even though the correct export figures were in GSTR-1?

Great question! The court found that just having the correct figures in GSTR-1 was not enough. The petitioner needed to produce actual export invoices and other corroborative documents to prove that the zero-rated supplies actually happened. They failed to do this at every stage of the proceedings.

Q2. Was the company given a fair hearing?

Yes. The court confirmed that a personal hearing was conducted on 31.01.2019, which was attended by the company’s representatives — Sri P.K. Choudhary and Sri Gurtej Singh. So the argument that natural justice was denied did not hold up.

Q3. What is the significance of GSTR-3B in refund claims?

GSTR-3B is treated as a self-assessment/declaration by the taxpayer. Since the company itself declared zero-rated supplies as “zero” in GSTR-3B, the tax authorities calculated the refund based on that figure, which resulted in zero refund. The court upheld this approach.

Q4. What is Rule 89(4) and why does it matter here?

Rule 89(4) of the CGST Rules, 2017 provides the formula for calculating refunds of unutilized ITC for zero-rated supplies. The petitioner argued that “adjusted total turnover” under this rule should exclude exempt supplies (per Section 2(47) of the CGST Act, 2017). However, since the zero-rated supply value in GSTR-3B was zero, the formula itself yielded a zero refund, making this argument moot.

Q5. What is Section 17(5) of the CGST Act, 2017 and how did it affect this case?

Section 17(5) of the CGST Act, 2017 lists categories of “blocked credits” where ITC is not available. The respondents used this provision to deny credit on specific invoices (point nos. 2(1), 2(2), 2(3), 2(7), and 2(8)), meaning even if the refund was otherwise admissible, these particular credits would still be blocked.

Q6. What is Circular No. 37/11/2018-GST dated 15.3.2018 about?

This CBIC circular deals with refund claims for export of goods without payment of tax. It requires that such claims be verified against actual invoices. The appellate authority relied on this circular to confirm that the refund could not be granted without invoice verification, which the petitioner failed to provide.

Q7. What is the key lesson for exporters and businesses from this case?

The biggest lesson is: always ensure your GSTR-3B is accurately filled, especially for zero-rated/export supplies. If there’s an error, correct it promptly and always maintain and produce documentary evidence (invoices, shipping bills, etc.) to support your refund claims. A mismatch between GSTR-1 and GSTR-3B, combined with a failure to produce supporting documents, can result in complete rejection of your refund claim — even at the High Court level.

The instant writ application has been preferred for following reliefs:-

(i) For issuance of Writ in the nature of Certiorari thereby quashing the order dated 29.10.2020 (Annexure-9) passed by respondent No.2 in Appeal No.29/CGST/JSR/2020 communicated to the petitioner on 03.12.2020.

(ii) For issuance of Writ in the nature of Certiorari thereby quashing the order in the prescribed Form-GST-RFD-06 being order no., 07/R-F/2019 dated 07.02.2019 contained in C. No.V (Refund) 18 / GST / CTC/ ITC/ Jan18/63/

JSR-111/2018/387 dated 07.02.2019.

(iii) For issuance of Writ in the nature of Mandamus directing respondent No.3 for refund of accumulated CGST, SGST and IGST credit for the period of January, 2018, total being Rs.9,89,191.00 to the petitioner.

2. The brief facts of the case as disclosed in the instant application

is that the petitioner is a company registered under the Company Act,

1956 and is a 100 percent export oriented unit, exporting its products to

countries like USA, China, Germany and other countries. The petitioner

filed an application for refund of accumulated CGST, SGST and IGST

credit for the period of January, 2018, total being Rs.9,89,191.00/- in the

prescribed Form-GST-RFD-01A along with supporting documents.

The petitioner while filing the GSTR-3B return of Input Tax

Credit for the month of January, 2018; inadvertently, missed out to

mention the zero rated supplies to the tune of Rs.3,79,82,605/- against

the outward taxable supplies (zero rated) in the said return and instead

mentioned the same to be “zero”. However, the said amount of zero rated

supplies has been correctly shown in GSTR-1 return of outward supplies

against export invoices.

On receipt of the refund application dated 13.12.2018, the

respondent No.3 issued and served a notice of rejection of application for

refund contained in C.No.V (Refund) 18/GST/CTC/ITC/Jan18/63/JST-

III/2018/57 dated 04.10.2019 calling upon the petitioner to show cause

as to why the refund claim to the extent of the amount mentioned therein

should not be rejected for the reasons mentioned therein.

Against the notice dated 04.01.2019, the petitioner filed its reply

on 29.01.2019 stating interalia that excess refund filed by considering

wrong NET ITC shall be rejected; expenses under Sl. No.1-3 relates to

part purchased for maintenance of Plant and Machinery used in

production, and therefore, CGST and SGST credit of Rs.2489.22 should

be allowed, however those mentioned in Sl. No.4-6 and 9 may be

rejected. In other words, the petitioner filed a detailed reply and after

considering the reply, the adjudication order has been passed.

3. The case of the petitioner is that the respondent No.3 without

considering the explanation given by the petitioner and without even

providing an opportunity of personal hearing passed an order in the

prescribed Form-GST-RFD-06 dated 07.02.2019, whereby the authority

has rejected the claim of the petitioner. Being aggrieved by the said order

of rejection dated 7.2.2019, the petitioner preferred an appeal, however

though the petitioner appeared in appeal and tried to satisfy the appellate

authority his case for refund has been rejected.

4. Learned counsel for the petitioner submits that the respondents in

the instant case has passed the impugned orders without considering the

facts in entirety and without considering the documents which was

provided by the petitioner. The respondents have failed to take into

account the fact that the definition of adjusted total revenue as provided

under Rule 89 (4) of the Central Goods and Services Tax Rules, 2017

specifically excludes the exempted supplies and the claim of the

petitioner for refund falls under exempt supplies as per Section 2(47) of

the Central Goods and Services Tax Act, 2017.

Further, the respondents have erred in rejecting the claim of

refund on the ground that the zero rated supply of Goods and Services

has been taken as Rs.3,79,82,605/- though the value of zero rated supply

as per GSTR-3B appears to be zero.

Relying upon the aforesaid submissions petitioner prayed for

quashing of the aforesaid rejection order as well as the appellate order

and further prayed for a direction for refund of the amount as claimed by

the petitioner.

5. A counter affidavit has been filed in this case by the respondent

stating interalia that there is no infirmity in the impugned adjudication

order, inasmuch as, refund claim has been rejected correctly as the

amount of the refund amount is calculated on the formula and since

value of zero rated supply of Goods and Services as per GSTR-3B for

January, 2018 is zero; hence refund amount appears to be zero.

It has been specifically stated in the counter affidavit that a

personal hearing was also granted to the petitioner on 31.01.2019 which

was attended by Sri P. K. Choudhary and Sri Gurtej Singh.

Mr. Amit Kumar, learned counsel for the respondents submits

that the invoices at point nos. 2(1), 2(2), 2(3), 2(7) and 2(8) was

considered but refund of credit was not admissible in terms of Section

17(5) of CGTST Act, 2017. Learned counsel further submits that

rejection of refund claim has been done correctly as the amount of refund

claim is calculated on the formula and since value of zero rated supply of

Goods and Services as per GSTR-3B for January, 2018 is zero hence

refund claim appears to be zero.

Learned counsel reiterated that during course of assessment

proceeding personal hearing was also conducted on 31.01.2019 which

was duly availed by the assesse and further the GSTR-3B is self

assessment/declaration and the petitioner did not corroborate his claim

by corresponding invoices; as such the claim of the petitioner for refund

was rejected in absence of supporting documents.

6. Having heard learned counsel for the parties and after going

through the documents available on record and the averments made in

the respective affidavits, it appears that petitioner has not produced any

documentary evidence for his claim of refund; either before the

adjudicating authority or before the appellate authority though he was

afforded personal hearing but the petitioner failed to prove that the

declaration zero rated value of GSTR-1 was legal and genuine.

It further transpires that the Appellate Authority has given a

categorically finding that the application for refund of unutilized ITC on

account of zero rated supplies has to be accompanied by documentary

evidence to establish that a refund is genuinely due to the applicant.

However, in the instant case such documentary or other evidence which

was necessary to substantiate the claim of the assesse was not furnished

even before the Appellate Authority.

In other words, the assesse could not provide any such

corroborative evidence in the form of documents even before the

Appellate Authority, what to say before the assessment proceeding, to

substantiate its claim of zero rated supply so that its claim could be

validated. The law is very clear that merely claiming any refund on the

basis of averments would not suffice unless and until the said claim of

any assesse is corroborated by documentary evidence. In the instant case,

the petitioner is making claim without furnishing any documentary

evidence to support their contention.

From the appellate order it also transpires that the Appellate

Authority has duly considered the circular No.37/11/2018-GST dated

15.3.2018 which is related to a refund claim on account of export of

goods without payment of tax and held that the same is possible only on

verification of invoices. At the cost of repetition, since the petitioner fails to substantiate its claim of refund by giving documentary evidence either before the assessment proceeding or before the appellate authority; his claim for refund has been rejected. Even before this Court, the petitioner failed to do so.

7. Before parting, it is pertinent to mention here that the claim of

the petitioner that the impugned order of rejection is bad in law on the

ground of principal of natural justice of affording reasonable opportunity

is also not sustainable, inasmuch as, from the impugned order itself it is

clear that personal opportunity of hearing was duly afforded to the

petitioner and as a matter of fact on the date of personal hearing, which

was conducted on 31.1.2019, the assesse was represented by Sri P. K.

Choudhary and Sri Gurtej Singh; as such, even the ground of natural

justice is misplaced in the instant case.

8. Having regard to the facts of the case and the discussion made

hereinabove, we refrain to interfere with the impugned orders.

Consequently, the instant writ application is dismissed on contest.

(Aparesh Kumar Singh, J.)

(Deepak Roshan, J.)