SEZ Pharmaceutical Company Wins Refund of Rs. 21.66 Lakh Unutilized ITC Following Britannia Industries Precedent

HC allowed the SEZ pharmaceutical company's writ application for refund of unutilized ITC amounting to Rs. 21,66,887. The court held that the applicant was entitled to claim refund of IGST credit in its Electronic Credit Ledger, following precedent established in M/s. Britannia Industries Limited vs. Union of India. The court quashed the Assistant Commissioner's rejection order and directed authorities to process the refund claim within three weeks, ruling that SEZ units making zero-rated supplies can claim refunds when no specific supplier can claim refund due to ISD distribution of Input Tax Credit.

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Issues:
Refund of Input Tax Credit (ITC) on inward supply, Utilization of IGST credit distributed by ISD, Refusal of refund application under Section 54 of the CGST Act, 2017

Analysis:
The writ applicant, a pharmaceutical company operating in a Special Economic Zone, sought a refund of accumulated Input Tax Credit (ITC) amounting to Rs. 21,66,887. The ITC comprised credits from ISD and inward supplies for export. The company claimed that, as a SEZ unit making Zero Rated Supplies under GST, it had not utilized the credit, which remained unutilized in the Electronic Credit Ledger. Following a refund application, a show cause notice was issued questioning the eligibility for refund under Section 54 of the CGST Act, stating that no circular or guidelines existed for SEZ units' GST refund claims. Subsequently, the Assistant Commissioner rejected the refund claim, leading to an unsuccessful appeal before the Joint Commissioner.

In the present writ application, the issue raised was considered settled based on a previous judgment dated 11th March 2020 in the case of M/s. Britannia Industries Limited vs. Union of India. The court noted that the writ applicant was entitled to claim the refund of the IGST credit in the Electronic Credit Ledger, as no specific supplier could claim the refund under the CGST Act and Rules due to the distribution of Input Tax Credit by the input service distributor. Consequently, the court allowed the writ application, quashed the impugned order, and directed the respondents to process the refund claim for the unutilized IGST Credit within three weeks from the date of the order.

In conclusion, the judgment addressed the issue of refunding Input Tax Credit on inward supply and the utilization of IGST credit distributed by ISD, overturning the refusal of the refund application under Section 54 of the CGST Act, 2017. The court's decision was based on the settled legal position established in previous judgments, emphasizing the entitlement of the writ applicant to claim the refund of unutilized IGST Credit in the Electronic Credit Ledger.

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