Uttarakhand HC Orders Refund of Wrongly Deducted GST on Rejected Seeds | Biz Flow Kit

The Uttarakhand High Court has ordered the refund of more than Rs. 10.23 lakh in GST deducted on the sale of rejected wheat and paddy seeds, observing that once it is undisputed that GST was not payable on the transaction, the department cannot continue to retain the amount.

The Bench of Justice Manoj Kumar Gupta and Justice Subhash Upadhyay has specified that on filing of these applications, the department must process and release the refund to the corporation immediately. Afterwards, the corporation was asked to refund the amount to the applicant within 2 weeks from receipt of the refund.

The issue has emerged after the applicant purchased rejected wheat and paddy seeds from Uttarakhand Seeds and Tarai Development Corporation Ltd. in 2017. During the sale, the Corporation deducted 10,23,484 for the GST from the security deposit of the applicant.

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The applicant claimed that GST was not subject to be paid on the transaction because the rejected seeds were neither sold in unit containers nor under any registered brand name. Reliance was placed on an advance ruling rendered in the case of M/s Sam Overseas, in which it had been specified that rejected wheat and paddy seeds would not draw GST unless supplied in unit containers having a registered brand name.

The applicant mentioned that even after repeated requests, the deducted GST amount was not refunded. This forced the applicant to approach the High Court earlier in 2020, where directions had been issued to the corporation to decide its representations for the refund.

As per the earlier order of the Court, the corporation passed an order on 16 October 2020, considering that the GST amount deducted from the applicant was, in fact, refundable. The corporation cited that it had earlier filed applications before the State Tax Department, desiring a refund of the GST amount, along with applications dated 1 June 2019 and 16 August 2020.

The corporation before the HC did not cite anything about the entitlement to a refund of the applicant and only claimed that the refund had not been processed via the tax authorities till now.

But, the State tax department claimed that the advance ruling in M/s Sam Overseas was binding only on the applicant in that matter and the related jurisdictional officer, and thus, its benefit could not extend to the present petitioner.

The HC, while rejecting the continued retention of the amount, stated that GST was not subject to be paid on the transactions in questions was not disputed by the authorities. The Bench categorically held that the department cannot be allowed to retain the tax amount any further after the consideration of the non-taxability of the transaction.

The revenue authorities in the hearing filed that a refund application needed to be submitted in Form GST RFD-01 under Rule 89 of the CGST Rules. The HC, considering the procedural norms, asked the corporation to submit the refund application in the stipulated form within 2 weeks.