Refund of VAT Input Tax Credit not allowed under Section 18(1)(a) and Section 140; only ITC set-off permitted

The HC dismissed the petition seeking refund of Input Tax Credit (ITC) accrued under the VAT regime during transition to GST. The court held that Section 18(1)(a) and transitional provisions under Section 140 permit carrying forward ITC as set-off against output tax under GST, but do not allow cash refund of such credit. Claims had to be made within prescribed time limits, including the initial deadline and the extended window as per SC directions, via Form GSTR TRAN-1. Since the petitioner failed to comply, no refund was warranted. The order rejecting the refund claim was upheld, confirming that only ITC set-off, not refund, is permissible in such cases.

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Issues:
Claim for refund of Input Tax Credit (ITC) accrued under the Value Added Tax (VAT) regime; interpretation of provisions under the CGST Act, 2017 regarding carry forward of ITC; applicability of Section 142(8)(b) in the case of refund claim; comparison with a judgment of the Punjab and Haryana High Court; analysis of Sections 16 and 18 of the Goods and Services Tax Act, 2017 in relation to ITC claims.

Analysis:
The petitioner, an assessee under the CGST Act, 2017, sought a refund of Input Tax Credit (ITC) accrued during the VAT regime. The petitioner claimed a total ITC of Rs. 1,88,60,453.42 during the VAT period, but only claimed Rs. 1,68,78,801/- for carry forward under the GST regime. The Assessing Officer allowed the entire claim, including the excess ITC of Rs. 19,81,652, but the refund was not permitted. The petitioner argued based on provisions of Section 140 and 142(8)(b) for ITC carry forward and refund, but the court found the argument fallacious as unclaimed ITC cannot be refunded in cash, only set off against output tax.

The court analyzed Section 142(8)(b) which deals with refund of tax, interest, fine, or penalty under the earlier law, emphasizing that unclaimed ITC cannot be refunded in cash. The court dismissed the petitioner's claim for refund, stating that the ITC available can only be claimed as a set-off against output tax, not as a cash refund. The court also highlighted that the petitioner did not avail the additional period provided for claims under Section 140, further weakening the refund claim.

The court compared the present case with a judgment of the Punjab and Haryana High Court, emphasizing that the circumstances and legal provisions differed. The court noted that the petitioner voluntarily did not include the unclaimed ITC in the transitional form and did not revise it within the stipulated time, thus disentitling the petitioner from a cash refund. The court highlighted the statutory provisions under Section 16 and 18 of the GST Act, which outline the conditions and restrictions for claiming ITC, emphasizing that ITC can only be claimed as a credit and not as a cash refund.

The court concluded that there was no basis to interfere with the order rejecting the refund claim, as the petitioner could only claim ITC as a set-off against output tax, not as a cash refund. Therefore, the writ petition was dismissed, affirming the rejection of the refund claim.

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