If the department is of the view that the refund was wrongly availed and sanctioned, then it should prefer an appeal and not issue a show cause notice under Section 74 of the Act.
Section 54 of the CGST Act, 2017—Refund –-- The applicant challenged the SCN dated 24th December 2020 issued under Section 74 by applying para 3.2 of the circular dated 4th September 2018 with retrospective effect. The applicant submitted that upon export of goods against a letter of undertaking without payment of tax, it was entitled to refund of the unutilized ITC under Section 54(3). The refund was sanctioned by the respondent. This refund amount is sought to be recovered on the premise that the applicant could not have utilized the CGST and SGST balance first. The respondent case is that it ought to have debited the IGST first. The applicant counsel submitted that the impugned circular, which lays down the order of debiting the electronic credit ledger, is ultra vires the provisions of the GST and the Rules made thereunder. Further, submitted that SCN under Section 74 could not have been issued for the purpose of taking back the refund, as such a recovery is not permissible in law. If the department is of the view that the refund was wrongly availed and sanctioned, then it should prefer an appeal and not issue a SCN under Section 74.
Held that:- The Hon’ble High Court issued notice to the respondents, returnable on 2nd March 2021.