2023 (11) TMI 1016 - HC - GST

Taxpayer entitled to GST refund under Section 54(3)(ii) for excess input tax paid in inverted duty structure

The Commercial Tax Officer-GD-III Versus M/s. Suzlon Energy Limited, The Assistant Commissioner (Appeal)

The Madras HC dismissed a petition challenging a refund order under GST Act Section 54(3)(ii). The case involved wrongful payment of 18% IGST on inputs ... Refund of tax wrongly paid due to absence of inverted duty structure - wrongful payment of tax @ 18% IGST instead of 5% - HELD THAT:- In the present case, there is no dispute on the fact that the vendor of the first respondent had paid 18% duty on the goods supplied to the first respondent. It is also not in dispute that the output or final product of the first respondent is chargeable at 5% IGST. The fact remains that the input is chargeable to duty at the rate of 5% and the same was admitted by the petitioner as well as the first respondent and it was also stated in the impugned order by the second respondent. In terms of Section 54(3)(ii) of the GST Act, if the rate of tax on input is higher than the rate of tax on output, certainly, the person can claim the refund - Accordingly, in the present case, the duty paid on input is 18% though it is chargeable at 5%. Therefore, this Court is of the considered view that the petitioner is entitled for refund in terms of the provision of the Section 54(3)(ii) of the GST Act and the said view was also held by the second respondent in the impugned order. Hence, this Court does not find any error or illegality in the order passed by the second respondent on this aspect. This Court is of the view that the first respondent is entitled for refund as per the order passed by the second respondent and the first respondent is also entitled for interest at the rate of 9% per annum of the refund amount for the delay period in terms of Section 56 of the GST Act. Petition dismissed. Issues involved:The issues involved in this case are the challenge to impugned orders passed by the second respondent, specifically regarding the payment of IGST at different rates for input and final products, and the entitlement of the first respondent for refund under Section 54(3)(ii) of the Goods and Services Tax Act, 2017.Challenge to Impugned Orders:The petitioner challenged the impugned orders on the grounds that the first respondent procured materials from a supplier who paid IGST at 18% for inputs, while the final product was liable for IGST at 5%. The petitioner argued that since the supplier paid the higher rate, the first respondent should also pay IGST at 18%. However, the second respondent did not consider this aspect, leading to the challenge of the impugned order.Contentions of the First Respondent:The counsel for the first respondent argued that the vendor had indeed paid IGST at 18%, and the jurisdictional officer had no standing to challenge the assessment order. The first respondent maintained that the assessment year had concluded, and there was no illegality in the impugned order. Additionally, the first respondent contended that the petitioner was taking contradictory stands for their convenience, citing the issuance of a show cause notice and subsequent rejection of the refund application.Analysis of Refund Entitlement:The court analyzed Section 54(3)(ii) of the GST Act, which allows refund of excess input tax credit if the rate of tax on inputs is higher than that on output supplies. It was established that the duty paid on input by the vendor at 18%, though chargeable at 5%, qualified the first respondent for a refund under this provision. The court upheld the view that the first respondent was entitled to a refund as per the law.Judicial Precedents and Conclusion:Referring to judgments from the Hon'ble Apex Court and the Hon'ble Division Bench of the Court, the court rejected the petitioner's contention that the first respondent should pay duty at the higher rate paid by the supplier. The court emphasized that the petitioner cannot insist on paying an excess rate of duty than prescribed by law. Ultimately, the court dismissed the writ petitions, directing the petitioner to pass the refund order and deposit the refund amount with interest to the first respondent within 30 days.Final Outcome:The court dismissed the writ petitions, affirming the entitlement of the first respondent for a refund under Section 54(3)(ii) of the GST Act and awarding interest at 9% per annum on the refund amount. No costs were awarded, and the connected miscellaneous petitions were closed accordingly.