AI Drafter 
TaxTMI 
TaxTMI 
2019 (11) TMI 162
X X X X Extracts X X X X
X X X X Extracts X X X X
....sts? (b) Whether the provisions of Notification No. 21/2018-Central Tax dated April 18, 2018 and Notification No. 26/2018-Central Tax dated June 13, 2018 are applicable to the applicant? 3. The applicant furnishes some facts relevant to the stated activity:- a. The applicant company states that the company is engaged in the manufacturing of incense sticks, Dhoops, Air fresheners, Pooja kits. He is using raw materials such as raw agarbathis, aroma materials, packing materials like plastic granules, paper and paper board as inputs and services such as marketing and distribution service, manpower service, job work service and rental services, freight and forwarding services as input service for said activity. b. The applicant company stated that his product is mainly agarbathis i.e. incense sticks falling under the HSN code of 33074100 taxable at the rate of five percent only and this invariably resulted in inverted rate duty structure, wherein ITC available on inputs and input service is more than output tax payable of the finished products. c. As per provisions of section 54(3)(ii) of the GST Act, the applicant company is eligible to claim refu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....claimed under sub-rules (4A) or (4B) or both; and (b) Adjusted Total turnover shall have the same meaning as assigned to it in sub-rule (4)." Therefore, the net ITC as defined under Rule 89(5) after amendment included only those input tax related to inputs availed by the assessee and did not include those related to input services. Yet again, there was another notification bearing Notification No. 26/2018- Central Tax dated June 13, 2018 issued in this regard which specified that the amendment made under Rule 89(5) of the CGST Rules vide Notification dated April 18th. 2018 is retrospective in nature and the same shall have retrospective effect from July 1st, 2017. 4. The applicant submits that CGST Act contemplates refund of unutilized input tax credits and the term unutilized input tax credit is not defined under Section 2(62) of the CGST Act. However the term input tax credit has been defined under section 2(62) of the CGST Act to mean, amongst others, the central tax, state tax, integrated tax or Union territory tax, charged on any supply of goods or services or both made to a registered person and a logical interpretation could be adopted that unutilized input....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... with Notification No.26/2018 -Central tax dated June 13, 2018. 10. Hearing was granted and in the Hearing, the applicant was given to know that the issue raised before the Advance Ruling Authority is not maintainable as it questioned the vires of the Notification amending the Rules and it was not within the scope of section 98 of the CGST Act or section 98 of the Karnataka Goods and Services Tax Act. The applicant was provided opportunity to provide sufficient support to whether the application is maintainable or not. 11. In light of the above, the applicant filed additional submissions stating that the applicant had filed application before the appropriate jurisdictional authority seeking refund of taxes paid on both inputs and input services and the appropriate authority had rejected the claim of refund of taxes paid on input services for the period October 2017 to January 2018 by relying on Notification No.21/2018-Central Tax prohibiting grant of refund of taxes paid on input services. He stated that nowhere in the rejection orders passed by the authorities, has a reference been made to the applicability or non-applicability of Notification No.26/2018- Central Tax and acc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... any rules or notifications to be prescribed is mentioned and hence it was not the intention of the law makers to curtail the refund of tax paid on input services in a case of inverted tax structure. 15. The applicant argues that he cross utilizes both inputs and input services for making outward supplies and section 54(3)(ii) is applicable to the instant case and the provisions of the Notification is not applicable in the facts and circumstances of the present case because, Section 54(3)(ii) grants refund of both input and input services whereas Notification No.26/2018-Central Tax envisages refund in scenarios where only input is used for making outward supply of goods and input services are used for making outward supply of services. Accordingly, Notification No.26/2018 is not applicable in the applicant's case. 16. The applicant also argues that the expression used in the Notification "Inverted Duty Structure" is not defined anywhere in the Act and the Rules and hence in the absence of the same, the applicant seeks clarity as whether the formula which is as prescribed for inverted duty structure under the Notification will be applicable in the case of the applicant. 17.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ub-rule (5), the following shall be substituted, namely:- "(5) In the case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula:- Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC/Adjusted Total Turnover} - tax payable on such inverted rated supply of goods and services. Explanation:- For the purposes of this sub-rule, the expressions,- (a) Net ITC shall mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both; and (b) Adjusted Total turnover shall have the same meaning as assigned to it in sub-rule (4)."" This clearly states that by these amendment rules, Rule 89(5) is substituted and regarding the applicability of these rules, it is clear that there is no mention of any exclusions in these amending rules and the above rules are made effective from July 1st, 2017 and hence the same are applicable to the applicant also. 20.3 Regarding the admissibility of the application for advance ruling, Section 97(2) whic....