In a recent ruling, the Bombay High Court addressed the issue of denying GST refunds based on technical non-compliance. The case involved M/s Pidilite Industries Ltd., a manufacturer of adhesives and chemicals, which exported goods under zero-rated supplies and sought a refund for unutilized Input Tax Credit (ITC) under the CGST Act. The refund claims were initially rejected due to procedural discrepancies, such as mismatches between shipping bills and invoices. The petitioner argued these were minor clerical errors that did not affect their substantive eligibility for the refund.

The central issue was whether refunds could be denied solely due to minor procedural lapses when the substantive conditions for exports were met. The High Court ruled that technical or procedural lapses should not override substantive rights, especially when the export of goods and tax payments are not in dispute. The court cited precedents like Formica India Division v. Collector of Central Excise and Mangalore Chemicals & Fertilizers Ltd. v. Deputy Commissioner, emphasizing that substance should prevail over form in tax matters.

Read More: GST – Allahabad High Court: Since goods were transported with valid invoice and e-way bill, penalty for infringement falls under Section 129(1)(a) and not Section 129(1)(b) [Order attached]

The court set aside the refund rejection order and instructed the tax department to grant the refund along with applicable interest. It also noted that with GST being a relatively new tax regime, a liberal interpretation that favors trade compliance should be adopted, particularly when there is no intention to evade taxes. This decision reinforces the principle that minor procedural errors should not hinder the rightful claims of businesses under the GST framework.