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Assessee is entitled to claim refund under Inverted Duty Structure even in case of same inward and outward supplies

Date 05 Mar 2024
Written By
Assessee Entitled to GST Refund Under Inverted Duty Structure When Inward and Outward Supplies Match, Per Section 54(3) CGST Act.
The Kerala High Court ruled that an assessee is entitled to claim a refund under the Inverted Duty Structure, even when the inward and outward supplies are the same. This decision came after a writ petition was filed by a company engaged in bottling LPG, which faced a higher GST rate on inputs than outputs. The court observed that under Section 54(3) of the CGST Act, refunds should not be denied when credit accumulates due to higher input tax rates. The court directed the assessing authority to calculate the refund, overturning a previous order that denied the refund based on a circular. - (AI Summary)

The Hon’ble Kerala High Court in the case of M/S. MALABAR FUEL CORPORATION, VERSUS THE ASSISTANT COMMISSIONER CENTRAL TAX AND CENTRAL EXCISE, KANNUR, THE JOINT COMMISSIONER (APPEALS) KOCHI, UNION OF INDIA, STATE OF KERALA, CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS - 2024 (1) TMI 1203 - KERALA HIGH COURT allowed the writ petition and held that, Assessee is entitled to claim refund under Inverted Duty Structure even in case of same inward and outward supplies.

Facts:

M/s. Malabar Fuel Corporation (“the Petitioner”) is engaged in the business of bottling Liquified Petroleum Gas (“LPG”) in cylinders for both domestic and commercial use. On the bulk supply of LPG received by the Petitioner from various refineries, the Petitioner is required to pay GST @ 18 %. However, after bottling, GST is charged on the value of cylinder supplied to domestic and commercial customers at the rate of 5% and 18% respectively. Thus, there was difference in Input Tax Credit (“ITC”) being higher than the tax on output in respect of the domestic supplies effected by the Supplier after bottling of the LPG in cylinders.

Thereafter, the Petitioner filed an application for refund under Section 54 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) for refund of accumulated ITC. However, the application/claim was rejected vide Appellate Order dated June 08, 2023 (“the Impugned Order”) on the basis of Circular No. 135/05/2020 dated March 31, 2020 (“the Circular”).

Aggrieved by the Impugned Order passed against the Petitioner, the Petitioner filed a writ petition before the Hon’ble High Court.

Issue:

Whether Assessee is entitled to claim refund under Inverted Duty Structure even in case of same inward and outward supplies?

Held:

The Hon’ble Kerala High Court in the case of M/S. MALABAR FUEL CORPORATION, VERSUS THE ASSISTANT COMMISSIONER CENTRAL TAX AND CENTRAL EXCISE, KANNUR, THE JOINT COMMISSIONER (APPEALS) KOCHI, UNION OF INDIA, STATE OF KERALA, CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS - 2024 (1) TMI 1203 - KERALA HIGH COURT held as under:

(Author can be reached at info@a2ztaxcorp.com)

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