TaxTMI 
TaxTMI 
2021 (2) TMI 589
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....ct i.e. sand stone under HSN 2505. For the purpose of excavation/production of sand stone/sand stone powder, the appellant has used capital goods and input services, but the input is nothing in this case except sand stone. The input services and capital goods used in the production and supply of the goods in the course of business by the appellant, attracts higher rate of tax than the rate of tax on their output supplies which resulted accumulation of input tax credit for which the appellant has filed refund in respect of input tax credit of Rs. 28,19,021/- (CGST Rs. 6,38,981/- + SGST Rs. 6,38,981/- + IGST Rs. 15,41,059/-) for the months of August, 2017 to March, 2018 accumulated on account of Inverted Tax Structure. 2.2 On scrutiny of refund application, submitted by the appellant the adjudicating authority noticed some deficiencies for which deficiency memo dated 13-8-2018 under GST RFD-03 was issued to the appellant in the matter and the same was replied along with the copies of demanded documents by the appellant which was received on 17-5-2019. On further scrutiny of the records and invoices on the strength of which the appellant has claimed input tax....
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....put tax credit at the end of any tax period : Provided that no refund of unutilized input tax credit shall be allowed in cases other than - (i) ------------ (ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council : • that further it may be noted that Rule 89(5) of the CGST Rules, prescribed methodology for computing the refund claim. Relevant paras of Rule 89(5) is excerpted below for your easy reference : (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 - ....
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.... submitted the revised refund computation sheet along with invoices only relating to inputs vide its letter dated April 30, 2019. It may be noted that reduced refund claim after removing refund claim of input services, was computed as Rs. 25,61,699/- (IGST Rs. 17,54,255/-, CGST Rs. 4,03,722/- and SGST Rs. 4,03,722/-). Month-wise recomputed refund claim has been tabulated below : S. No. Month Refund IGST CGST SGST Total 1. Jul., 17 - - - 2. Aug., 17 1,60,057 21,958 21,958 3. Sep., 17 2,87,716 19,017 19,017 4. Oct., 17 0 53,688 53,688 5. Nov., 17 3,10,870 34,149 34,149 6. Dec., 17 28,330 21,053 21,053 7. Jan., 18 3,94,488 39,919 39,919 8. Feb., 18 3,64,402 74,349 74,349 9. Mar., 18 2,08,392 1,39,589 1,39,589 Total 17,54,255 4,03,722 4,03,722 25,61,699 • that the Department in its impugned order has alleged that no document/invoices relating to inputs has been found in the application, wherea....
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....mits that in the present case, the tools or parts/spares of the machinery is replaced due to wear and tear. Such tool/parts do not value add to the machinery and thus is not liable to get capitalize in the books of accounts of the Appellant in terms of Income-tax Act, 1961 and/or accounting principles. Therefore, once such goods are not capitalized in the books of accounts as per Income-tax Act, 1961, the same would not qualify as 'capital goods' in terms of Section 2(19) of CGST Act and hence would be considered as 'inputs' in terms of Section 2(59) of CGST Act. • that in this regard, the Appellant submits that the Government has also clarified the issue of interpretation/treatment of term 'inputs' in the context of refund claims, vide Circular No. 79/53/2018-GST, dated December 31, 2018 wherein under para 12 and para 13, it has been explicitly clarified that any expenditure on which has been charged as a revenue expense in the books of account, cannot be held to be capital goods. Relevant part of paras 12 and 13 of the said Circular has been excerpted below for the easy reference : Misinterpretation of the meaning of the term "inputs"; 12 .........
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....llant has considered ITC while computing the refund claim under Rule 89(5), whereas the Appellant vide its letter dated April 30, 2019 and May 14, 2019 has explicitly stated that the Appellant has withdrawn/reduced the refund claim to the extent claimed towards input services and a new refund computation sheet with reduced refund claim was submitted wherein only ITC on inputs was considered. • that in light of the above submissions, it is ample clear that the Department has clearly overlooked the invoices/documents/account-ing treatment of the expenses and hence could not be able to establish the fact that the invoices were actually pertains to input and not capital goods or input services. The Appellant vehemently submits that the impugned order is liable to be set aside on this ground alone without even going into the merits. • that impugned order is arbitrary/without basis and in complete violation of the principles of natural justice. The appellant has also placed reliance on the following decisions :- M/s. Inbios Petroleum Limited v. CTO, Kerala [2012-ST2-GJX-556-MAD] M/s. Prism Metal Corporate v. State of Maharashtra [2014-ST1-GJ....
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.... only. 6. The issue involved in the present case is that whether the goods on which credit is accumulated and refund is claimed is 'input or capital goods', the appellant has submitted declaration dated 27-6-2018 regarding refund claim filed for the period July, 2017 to March, 2018 that it does not include any amount of Goods and Services Tax paid on procurement of inputs, which has been capitalized or treated as expense in their books of accounts. They also declared that refund of input tax credit on account of input services and capital goods has not been claimed in their revised computation whereas, the adjudicating authority has treated the items as capital goods and rejected the claim. 7. Section 54(3) of the CGST Act, 2017 reads as under : (3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilized input tax credit at the end of any tax period : Provided that no refund of unutilized input tax credit shall be allowed in cases other than - (i) zero-rated supplies made without payment of tax; (ii) where the credit has accumulated ....
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....nsider ITC on stores and spares, packing materials, materials purchased for machinery repairs, printing and stationery items, as part of Net ITC on the grounds that these are not directly consumed in the manufacturing process and therefore, do not qualify as input. There are also instances where stores and spares charged to revenue are considered as capital goods and therefore the ITC availed on them is not included in Net ITC, even though the value of these goods has not been capitalized in his books of accounts by the claimant". 13. "In relation to the above, it is clarified that the input tax credit of the GST paid on inputs shall be available to a registered person as long as he/she uses or intends to use such inputs for the purposes of his/her business and there is no specific restriction on the availment of such ITC anywhere else in the GST Act. The GST paid on inward supplies of stores and spares, packing materials etc., shall be available as ITC as long as these inputs are used for the purpose of the business and/or for effecting taxable supplies, including zero-rated supplies, and the ITC for such inputs is not restricted under Section 17(5) of the CGST Act. ....