Refusing a refund application for unutilized Input Tax Credit (ITC) on the grounds of deficiency without proper communication is impermissible by the department.
The taxpayer submitted a refund application for unutilized input tax credit linked to zero-rated supplies (exports), along with the necessary documents through the GST portal.
The tax authority asserted that the application lacked completeness and requested the taxpayer to submit a new application. However, the communication from the authority failed to specify the exact deficiencies identified.
The court ruled in favor of the taxpayer, stating that the application adhered to Rule 89(2) of CGST Rules, included all necessary documents, and was not deficient. The communication from the tax authority was deemed insufficient, and they were instructed to set it aside, provide an acknowledgment, and process the refund application in compliance with the applicable laws.