TaxTMI 
TaxTMI 
2025 (7) TMI 1768
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....cular No. 45/19/2018-GST dated 30.05.2018 as well as paragraph no. 42 of Circular No. 125/44/2019-GST dated 18.11.2019 being contrary to Sec. 11 of the Goods and Services Tax (Compensation to States) Act, 2017 is wholly without jurisdiction, manifestly arbitrary and violating Article 14 of the Constitution of India, B. Your Lordships may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other writ, order or direction quashing and setting aside (a) paragraph 5 of Circular No. 45/19/2018-GST dtd. 30/05/2018, (b) paragraph no. 42 of Circular No. 125/44/2019-GST dated 18.11.2019 (c) Show-cause Notice annexed at Annexure D above, (d) Order in Form RFD-06 dtd. 08/04/2021 rejecting refund claim (Annexure E hereinabove) and (e) Order dtd. 19/05/2022 (Annexure F hereinabove) as being wholly without jurisdiction, arbitrary and illegal, C. Your Lordships may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other writ, order or direction quashing and setting aside (a) Show-cause Notice annexed at Annexure D above, (b) Order in Form RFD-06 dtd. 08/04/2021 rejecting refund claim (Annexure E hereinabove) and (c) Or....
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....eeking to reject the refund claim on the ground that refund of cumulative cess credit group claim was available only in respect of zero-rated supplies made without payment of IGST. 3.5 The respondent, further clarified that since the zero-rated supply done by the petitioner have been made with payment of IGST, the refund of cumulative cess credit shall not be admissible and cannot be permitted. Against the show-cause notice dated 25.02.2021, the petitioner responded by way of filing reply. The respondent, by way of an order dated 08.04.2021 in Form RFD-06, rejected the refund claim of the petitioner. Being aggrieved by the order dated 08.04.2021 rejecting the refund claim, the petitioner preferred an appeal under the provisions of Sec. 107(1) of the CGST Act. The appeal came to be rejected vide order dated 19.05.2022 which has culminated into filing of the present writ petitions. The Order in Appeal as well as the Order-in-Original are subject matter of challenge in the present writ petitions. 4 Mr. Abhay Desai, learned advocate for the petitioner, relying on secs. 9 and 11 of the Cess Act, submitted that the said sections seeks to apply the provisions of the GST Act, includi....
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..... It was further held that the petitioner may have paid the IGST on the goods exported by it, however, the petitioner was not required to pay any compensation cess as the goods manufactured by the petitioner are exempted from the levy of tax. 6.1 This Hon'ble court in paras 6,7,8,18,19,20 and 21 of the said decision has held as under: "6 The petitioner is a public limited company engaged in the business of manufacture and sale of dyes, dye intermediate, chemicals etc. The petitioner purchased coal for use in its manufacturing process. The petitioner also paid Cess under the Cess Act in addition to the GST for purchase of the coal. It is the case of the petitioner that while coal purchased by the petitioner is liable to Cess, however, the finished goods manufactured by the petitioners are not liable to GST compensation Cess under the Cess Act. Therefore, when the finished goods manufactured by the petitioner are exported outside the country on payment of IGST as permitted by Section 16 of the IGST Act, the petitioner is entitled to the refund of such IGST, however, the petitioner is not required to pay Cess at the time of export of the goods and as the exports being zero....
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....aim the Input Tax Credit of the Cess amount which was paid by the petitioner while purchasing the coal and as such coal was utilized for manufacture of exported goods 19. In view of the above, it would be germane to refer to the relevant provisions of the CGST Act and the IGST Act as well as the Cess Act. 19.1. Section 54(3) of the CGST Act reads as under "Section 54 - Refund of tax- (1)..... (2)..... (3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period: PROVIDED that no refund of unutilised 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 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: PROVIDED also that no refund of input tax credit shall be allowed, if the supplier of goods or services or bot....
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....thing contained in sub sections (3) and (4), no refund of unutilised input tax credit on account of zero rated supply of goods or of integrated tax paid on account of zero rated supply of goods shall be allowed where such zero rated supply of goods are subjected to export duty] 19.3. Section 11(2) of the Cess Act reads as under "Section 11 Other provisions relating to cess (1) (2) The provisions of the Integrated Goods and Services Tax Act, and the rules made thereunder. including those relating to assessment, input tax credit, non-levy, short-levy, interest, appeals, offences and penalties, shall, mutatis mutandıs, apply in relation to the levy and collection of the cess leviable under section 8 on the inter-State supply of goods and services, as they apply in relation to the levy and collection of integrated tax on such inter-State supplies under the said Act or the rules made thereunder PROVIDED that the input tax credit in respect of cess on supply of goods and services leviable under section 8, shall be utilised only towards payment of said cess on supply of goods and services leviable under the said section 20. The relevant pa....
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.... Compensation Cess 42. Doubts have been raised whether a registered person is eligible to claim refund of unutilized input tax credit of compensation cess paid on inputs, where the zero-rated final product is not leviable to compensation cess. For instance, cess is levied on coal, which is an input for the manufacture of aluminium products. whereas cess is not levied on aluminium products. In this context, attention is invited to section 16(2) of the Integrated Goods and Services Tax Act, 2017 (hereafter referred to as the "IGST Act") which states that, subject to the provisions of section 17(5) of the CGST Act, credit of input tax may be availed for making zero rated supplies. Further, section 16 of the IGST Act has been mutatis mutandis made applicable to inter-State supplies under the Cess Act vide section 11 (2) of the Cess Act. Thus, it implies that input tax credit of Compensation Cess may be availed for making zero-rated supplies. Further, by virtue of section 54(3) of the CGST Act, the refund of such unutilized ITC shall be available. Accordingly, it is clarified that a registered person making zero rated supply of aluminium products under bond or LUT may claim ref....
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....d or may claim refund of unutilized credit including that of compensation cess paid on coal. The circular further clarifies that when the registered person make a zero rated supply of product on payment of integrated tax, they cannot utilize the credit of the compensation cess paid on coal for payment of Integrated tax in view of the proviso to Section 11(2) of the Cess Act, as the said proviso allows the utilization of the input tax credit of cess, only for the payment of cess on the outward supplies. However, when the petitioner has paid the IGST under Section 16(3) of the IGST Act on the zero rated supply and refund is claimed by the payment of such IGST, the petitioner admittedly would not be able to utilize input tax credit of cess as cess is not payable on the zero rated supply Therefore, proviso to Section 11(2) of the Act would not be applicable in the facts of the case and the petitioner would be entitled to refund of the unutilized input tax credit on cess paid on purchase of coal utilized for the purpose of manufacture of goods which are exported." 7. The facts and law enumerated in the case of Patson Papers (supra), would be squarely applicable to the facts of the pr....