Delhi High Court Sets Precedent: Refund Application Cannot Be Ignored Due to Deficiency Memo, Rules in Favor of National Internet Exchange of India

In a significant decision, the Delhi High Court reiterating that an application for refund cannot be deemed invalid solely based on a deficiency memo issued by the proper officer. The court’s decision came in response to a writ petition filed by the National Internet Exchange of India (NIXI), challenging the rejection of their refund claim of Integrated Goods and Services Tax (IGST) by the Department of Trade and Taxes.

Justice Vibhu Bakhru and Justice Amit Mahajan delivered the judgment, emphasizing that if an application for refund is complete and accompanied by the necessary documentary evidence, it cannot be ignored even if the proper officer seeks further clarifications or additional documents. The court held that the mere issuance of a deficiency memo does not render the application “non est,” and the taxpayer’s compliance with the prescribed form and manner of filing is sufficient to stop the period of limitation.

The court referred to its earlier decision in the case of Bharat Sanchar Nigam Limited v. Union of India & Ors., where a similar interpretation was provided. The ruling reaffirmed that Rule 90(3) of the Central Goods and Services Tax Rules, which deals with deficiencies noted in refund applications, cannot be interpreted to invalidate applications that are otherwise complete and in accordance with the law.

“The present case is covered by the decision in the case of Bharat Sanchar Nigam Limited v. Union of India & Ors. And thus, it is not necessary to examine the broader challenge to the vires of Rule 90(3) of the CGST Rules or paragraph 12 of the impugned Circular,” stated Mr. Ramachandran, senior standing counsel for the Revenue.

The court allowed NIXI’s petition, setting aside the impugned order rejecting the refund application based on the ground of limitation. The case has now been restored for fresh consideration by the proper officer on its merits.

This judgment holds significance as it clarifies the procedural aspect of refund applications under the GST regime and underscores the principle that an application for refund cannot be dismissed solely due to deficiencies, as long as the prescribed form and documentary evidence are furnished. The decision provides relief to taxpayers by preventing their refund claims from being invalidated on technical grounds, ultimately safeguarding their rights and interests.

Date of Decision: 9 August 2023

NATIONAL INTERNET EXCHANGE OF INDIA  vs UNION OF INDIA & ORS.