By CA Ritesh Arora
Yes, the Honorable Kerala High Court in the case of M/s. Malabar Fuel Corporation v. Assistant Commissioner Central Tax & Central Excise [WP (C) No. 26112 of 2023 dated January 11, 2024] allowed the writ petition and held that the Taxpayer is entitled to claim refund under inverted Duty Structure even in case of same inward and outward supplies.
The Honorable Kerala High Court observed that as per clause (ii) of Section 54(3) of the CGST Act, the Taxpayer is permitted to claim refund of tax, in case where the credit is accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies, or supplies of goods or services or both as notified by the Central Government on the basis of recommendation of GST Council.
The Honorable Court noted that as per Section 54 of the CGST Act, the refund of ITC should not be denied when the supplies do not fall within the purview of the exceptional clause and credit has accumulated on account of rate of tax on input being higher than rate of tax on output supplies.
Relying upon the judgment of Honorable Guwahati High Court in the case of BMG Informatics Private Limited v. Union of India [WP (C) No. 3675 of 2021 dated September 2, 2021], Honorable Calcutta High Court in the case of Shiva to Associates v. Joint Commissioner of State Tax [WPA No. 54 of 2022 dated March 11, 2022] and Honorable Delhi High Court in the case of Indian Oil Corporation v. Commissioner of Central Goods and Services Tax and Ors. [WP (C) No. 10222/2023 dated December 05, 2023] opined that the condition laid down in the Circular pertaining to denial of refund of credit accumulated to a dealer in case when the tax on input is higher that the input supplies, in case where the input and output supplies are same, should not be taken into consideration and held that the Petitioner is entitled to refund of the ITC accumulated.
Author’s Comments”
A similar judgement was passed in the case of M/s. Nahar Industrial Enterprises Limited v. Union of India [Civil Writ Petition No. 8476 of 20/21 dated October 31, 2023] by the Honorable Rajasthan High Court (Jaipur Bench) wherein it was held that the refund of Input Tax Credit can be claimed when there are multiple inputs having a higher rate of GST than the rate of GST on outward supplies. The Honorable Court relied upon the Circular No. 79/53/2018-GST dated December 31, 2018, and Circular 125/44/2019-GST dated November 18, 2019.
The department is currently rejecting the refund of accumulated credit where the inward and outward supplies are the same, citing circular no. 135/5/2020-GST dated March 31, 2020. It is pertinent to mention here that this circular is issued under section 168 of the CGST Act, 2017 and it is binding on the Proper officers only. Section 54(3)(ii) provides for the refund of accumulated ITC under such circumstances.
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