AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 1537
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.... Hon'ble High Court may think fit." 2. A perusal of the material on record will indicate that the petitioner submitted refund applications for various tax periods pursuant to which show cause notices were issued by the respondent proposing to reject the refund request of the petitioner who submitted replies and the proceedings culminated in the impugned orders rejecting the refund claim of the petitioner whose appeals were also dismissed by the appellate authority. It is an undisputed fact as borne out from the material on record that the petitioner is engaged in the business of procuring various edible oils such as Sunflower oil, Rice bran oil, Cottonseed oil, Palm oil etc., falling under HSN Code 15 on payment of tax at 5%. It is also to be stated that the said edible oils are purchased in bulk in tankers and then packed into various containers bearing the net weight of 250 ml, 500 ml, 1 litre or 5 litre at their premises for selling by way of both business to business and also business to customers at the tax rate of 5% under the same HSN Code 15. Under these circumstances, the petitioner accumulated ITC and sought for refund of the accumulated and unutilised ITC on accou....
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....tward Supplies Major Inputs Furnace Oil/Bunker Fuel - 5%, (HSN: 271019) Furnace Oil/Bunker Fuel (271019) - 18%, R&M Materials - 18%/28%, Printing and Stationery Items- 18% etc., PDS Superior Kerosene - 5% (HSN: 271019) Superior Kerosene - (PDS) (271019)- 5%/18%, Blue Dye - 18%, R&M Materials -18%/28%, Printing and Stationery Items- 18% etc., LPG-Domestic - 5%, (HSN: 271119) LPG Domestic Propane (2711)- 5% LPG Domestic Butane (2711) - 5% SC Valve (8481)- 18%, Safety Cap for SC Valve (3920) - 18%, O-rings (401699) - 18%, Tamper Evident Seal for Cylinder (4016 93)- 18%, Repair and Maintenance Material - 18%/28%, Printing and Stationery Items - 18% etc., 2.2 It is contended that as per the aforesaid table, the outward supplies of goods are taxable at 5%, whereas inputs are chargeable to GST @ 5%, 18% and 28% and therefore, resulting in accumulated credit on account of inverted duty structure and accordingly, in terms of Section 54(3)(ii) of CGST Act, 2017, petitioner was entitled for refund of accumulated ITC on account of inverted duty structure on supply of LPG-Domestic, Bunker Fuel, Superior Kerosene Oil (SKO)-PDS from the respondent. 2.3 The p....
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....mmissioner of CGST - 2023(13) Centax 228 (Del). * It is submitted that where there are multiple inputs attracting different rates of tax as per the formula provided in Rule 89(5) of the CGST Rules, the expression/term "Net ITC" covers the ITC availed on all inputs in the relevant period, irrespective of their rate of tax and in this regard, learned Senior counsel placed reliance upon paragraph-54 of the Circular bearing No.125/44/2019-GST dated 18.11.2019 issued by the respondent. * It is submitted that the respondent has erroneously placed reliance upon Para 3.2 of Circular No. 135/05/2020-GST dated 31.03.2020 though the same has no application in the present case as the said Circular applies only to scenarios/situations where the ITC is accumulated on account of different rates being applicable at different points of time and merely seeks to address an issue where the ITC is accumulated on account of different rates being applicable at different points of time as held by the Delhi High Court in the petitioner's own case in Indian Oil Corporation's case supra and the impugned orders deserve to be quashed on this ground alone. * It is submitted that Para ....
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....x 153 (Ker); viii) MO Industries vs UOI 2024-TIOL 1245 HC RAJ GST ; ix) Eveready Spinning Mills P Ltd vs ACCT 2024 TIOL 1207 HC MAD GST; x) Ranbaxy Laboratories Ltd vs UOI 2012 (27) STR 193 (SC); xi) Raghav Ventures vs Commissioner of Delhi GST 2024 (16) Cen 69 (Del); xii) Panaji Engineering P Ltd vs UOI 2023 (9) Cen 419 (Guj). 5. Per contra, learned counsel for the respondent would submit that there is no merit in the petition and that the same is liable to be dismissed. 6. Before adverting to the rival contentions, it would be necessary to reproduce Section 54 of the CGST Act, which reads as under; "54. Refund of tax. (1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed: Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in 1 [such form and] manner as may be prescribed. ....
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....based on the documentary or other evidences available with him, certifying that the incidence of such tax and interest had not been passed on to any other person. (5) If, on receipt of any such application, the proper officer is satisfied that the whole or part of the amount claimed as refund is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund referred to in section 57. (6) Notwithstanding anything contained in subsection (5), the proper officer may, in the case of any claim for refund on account of zero-rated supply of goods or services or both made by registered persons, other than such category of registered persons as may be notified by the Government on the recommendations of the Council, refund on a provisional basis, ninety per cent. of the total amount so claimed, in such manner and subject to such conditions, limitations and safeguards as may be prescribed and thereafter make an order under sub-section (5) for final settlement of the refund claim after due verification of documents furnished by the applicant. (7) The proper officer shall issue the order under sub-section (5) within sixty days....
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....r where any other proceedings under this Act is pending and the Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue in the said appeal or other proceedings on account of malfeasance or fraud committed, he may, after giving the taxable person an opportunity of being heard, withhold the refund till such time as he may determine. (12) Where a refund is withheld under sub-section (11), the taxable person shall, notwithstanding anything contained in section 56, be entitled to interest at such rate not exceeding six per cent. as may be notified on the recommendations of the Council, if as a result of the appeal or further proceedings he becomes entitled to refund. (13) Notwithstanding anything to the contrary contained in this section, the amount of advance tax deposited by a casual taxable person or a non-resident taxable person under sub-section (2) of section 27, shall not be refunded unless such person has, in respect of the entire period for which the certificate of registration granted to him had remained in force, furnished all the returns required under section 39. (14) Notwithstanding anything contained in....
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....decree, order or direction of the Appellate Authority, Appellate Tribunal or any court, the date of communication of such judgment, decree, order or direction; "(e) in the case of refund of un utilized input tax credit under clause (ii) of the first proviso to sub-section (3), the due date for furnishing of return under section 39 for the period in which such claim for refund arises;" (f) in the case where tax is paid provisionally under this Act or the rules made thereunder, the date of adjustment of tax after the final assessment thereof; (g) in the case of a person, other than the supplier, the date of receipt of goods or services or both by such person; and (h) in any other case, the date of payment of tax." 7. Para 3.2 of Circular No.135/05/2020-GST dated 31.03.2020 is reproduced as under: 3.2 Iit may be noted that refund of accumulated ITC in terms clause (ii) of sub-section (3) of section54 of the CGST Act is available where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies. It is noteworthy that, the input and output being the same in such cases, though at....
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....here the input and the output supplies are the same. However, by way of substitution vide Circular No. 173/05/2022-GST dated 06-07-2022, the restriction that refund of accumulated credit on account of inverted duty structure, in case where input and output supplies are the same has been deleted. It is therefore clear that the petitioner is eligible to claim refund of inverted duty structure, even when input and output are same and consequently, the impugned orders passed by the respondent refusing to grant refund in favour of the petitioner deserves to be set aside and directions are to be issued to the respondent to grant refund in favour of the petitioner. 10. It is also significant to note that substitution of Para 3.2 of the aforesaid Circular dated 31.03.2020 by subsequent Circular No.173/05/2022-GST dated 06.07.2022 being beneficial in nature, the same has to be applied retrospectively and the Circular dated 06.07.2022 is clarificatory in nature and is binding on the Department as held by the Apex Court in the cases of Suchitra Components Ltd vs CCE, Guntur - 2006(12) SCC 452 and K.P. Varghese Vs Income Tax Officers - (1981) 131 ITR 597 (SC) and consequently, the pet....
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....dertaking and is, inter alia, engaged in the business of bottling and distributing LPG for domestic as well as industrial use. 5. The principal source of LPG is oil refineries processing crude oil. LPG vapour is produced in the oil refineries during the refining process. It is stated that LPG consists of various hydrocarbons such as propylene, butane and butylene. The said hydrocarbons are liquefied on compression. LPG is transported in bulk through road and rail to the petitioner's bottling plant. It is unloaded and compressed into liquid form and the same is refilled and bottled in cylinders. The cylinders are thereafter sealed and safety valves are fixed. The said cylinders are then distributed to customers. 6. Once the seals of the cylinder are opened, the LPG returns to the gaseous state, which is used by the end consumers. The Supreme Court had considered the said process in Commissioner of Income Tax-I, Mumbai v. Hindustan Petroleum Corporation Ltd.1 in the context of whether the same amounts to manufacture or production for the purpose of Section 80-HH, 80-I and 80-IA of the Income Tax Act, 1961. The Court concluded that the LPG produced at the oil ref....
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....90.00 2 11-8-2022 January, 2020 2,03,31,308.00 3 11-8-2022 February, 2020 2,21,91,912.00 4 24-8-2022 July, 2020 58,46,517.00 5 24-8-2022 August, 2020 1,22,98,882.00 11. The petitioner filed separate appeals against the respective Orders-in-Original passed by the Adjudicating Authority before the Appellate Authority. However, the said appeals were rejected by a common Order-in-Appeal No.19-23/2023-24 dated 21.04.2023 (hereafter the 'impugned order') which is assailed in the present petition. REASONS AND CONCLUSION 12. At the outset, it is material to note that in terms of Section 112 of the CGST Act, the petitioner has a remedy of appealing the impugned order before the Appellate Tribunal. However, the petitioner is unable to avail of the said remedy as the Tribunal is not constituted. Thus, we consider it apposite to entertain the present petition. 13. A perusal of the Orders-in-Original indicates that the petitioner's claim for refund was denied on the ground that the bulk LPG as well as bottled LPG is the same product chargeable to GST at the rate of 5%. The Adjudicating Authority held....
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....at two different points of time which resulted in accumulation of ITC to the recipient of such goods. 6.2 On going through the relevant portion of Circular No.135/05/2020-GST dated 31.03.2020, I find that though, there is force in the submission made by the appellant that the clarification is applicable in those cases where accumulation of ITC was due to reduction in tax rate by the Government yet these clarifications applicable upon them which is evident from the last sentence of para 3.2 of the above Circular which clearly clarifies that refund of accumulated ITC under clause (ii) of sub- section (3) of section 54 of the CGST Act would not be applicable in cases where the input and the output supplies are the same. In the appellant's case, the adjudicating authority observed that the major input used by the appellant in LPG (HSN 2711) which was procured in bulk quantity from refiners and taxable @5% GST. The said LPG is repacked in domestic cylinder and supplied / marketed also @5% GST. Hence, the observations of the adjudicating authority, in this context, are sustainable and the appellant's submissions are not acceptable." 15. It is apparent from the a....
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....aiming refund of tax and interest paid on such tax or any amount paid by him, is entitled to make an application for refund before expiry of two years from the relevant date, which is defined under Explanation (2) to Section 54 of the CGST Act. Sub-section (3) of Section 54 of the CGST Act provides that subject to provisions of Sub-section (10) of Section 54 of the CGST Act, a person may claim refund of unutilised ITC at the end of any tax period. However, the proviso to Sub-section (3) to Section 54 of the CGST Act restricts the entitlement to refund of unutilised ITC. It expressly provides that no refund of unutilised ITC would be allowed except in cases covered under Clauses (i) and (ii) of the proviso to Section 54(3) of the CGST Act. Under Clause (i) of the proviso to Section 54(3) of the CGST Act, refund of ITC is available in cases of zero rated supplies made without payment of tax. In terms of Clause (ii) of the proviso to Section 54(3) of the CGST Act, refund is admissible, where the credit is accumulated on account of rate of tax on inputs being higher than the rate of tax of output supplies. Sub-section (3) of Section 54 of the CGST Act is set out below: "Sectio....
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....he situations provided in clauses (i) and (ii) and no other. To put it differently, the first proviso can be recast, without altering its meaning to read that a refund of unutilised ITC shall be allowed only in the cases governed by clauses (i) and (ii). ..." 20. The petitioner's claim for refund is founded on Clause (ii) of the proviso to Section 54(3) of the CGST Act. According to the petitioner, the rate of tax on certain inputs is higher than the tax paid on outputs (bottled LPG). Resultantly, the petitioner has been unable to fully utilise the ITC on its inputs. 21. There is no controversy or dispute that the petitioner uses various items in production of bottled LPG, which include accessories required for the purposes of safety. Undisputedly, the items and accessories as specified are essential for production of the bottled LPG and making it suitable for retailing. The said items are chargeable to varying rates of GST. A tabular statement setting out the input supplies, their classification, and the rate of tax chargeable on such supplies as set out in petition, is reproduced below Name of Input HSN Tax Rate(%) LPG bulk sourced from refinerie....
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....t one of the principal objects of enacting the CGST Act was to address the cascading effect of taxes as the taxes levied by the Central Government and State Governments were not available for being set off for payment of other taxes. It is clear that the legislative intent behind grant of refund of unutilised ITC that has accumulated on account of inverted tax structure is to confine the tax to the tax on the output supplies at the rate so fixed. In view of the plain language of proviso to Sub-section (3) of Section 54 of the CGST Act, the Revenue's contention that the petitioner is not entitled to refund of unutilised ITC as the rate of bulk LPG and bottled LPG is the same, is unsustainable. It is impermissible to disregard the rate of tax on other inputs. 26. As stated at the outset, a taxpayer's claim for refund, which is admissible under Section 54 of the CGST Act, cannot be denied on account of a Circular issued by CBIC under Section 168(1) of the CGST Act. Plainly, if the Circular No.135/05/2020 is read in the manner as contended by the Revenue, it would be in conflict with the provisions of Section 54(3) of the CGST Act and thus, would be liable to be set as....
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....s it is apparent that the same is inapplicable in the facts of the present case. The clarification seeks to address an issue where the ITC is accumulated on account of different rates being applicable at different points of time. It does not seek to address any issue where the principal input and output is the same. In terms of the Circular 135/5/2020, if the rate of tax on input and output is the same and ITC is accumulated on account of different rates being applicable at different points of time, the case would not fall under Clause (ii) of the proviso to Sub-section (3) of Section 54 of the CGST Act. The use of the words, the input and output being the same, is essentially in the context of the rate on input and output being the same. 28. Circular No.135/05/2020 has no application where ITC, refund of which is sought, has accumulated on account of rate of taxes on certain inputs being higher than tax chargeable on the output supply, notwithstanding that the one of the main input and output is chargeable at the same rate of tax. 29. There may be myriad of circumstances where the ITC accumulates notwithstanding that the rate of tax on input and output supplies i....
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.... there may be instances where the input and output supplies are the same. On the contrary, it can be said that the legislature consciously did not create any distinction for allowing refund in all cases where the input tax is more than the output tax. The said benefit is applicable to all similar cases." 32. In Baker Hughes Asia Pacific Limited v. Union of India4, the Hon'ble Rajasthan High Court held that in cases where the refund of accumulated ITC arises on account of the inverted duty structure, the 2022 SCC OnLine Raj 1061 same could not be denied on the ground that the input and output supplies were the same. 33. In BMG Informatics (P.) Ltd. v. The Union of India and Ors.5, the Hon'ble Gauhati High Court held that Circular No. 135/05/2020 is unsustainable and is liable to be ignored. 34. Mr Tripathi, learned counsel appearing for Revenue had sought to distinguish the aforesaid decision on the ground that in the said cases, there was a difference in the rate of tax chargeable on input and output even though the input and output supplies were the same. He contended that therefore, in such circumstances, refund would be admissible under Clause ....
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....IOL 1207 HC MAD GST (Para 6,7) 15. As held in the aforesaid judgments by the Delhi High Court and other High Courts, Section 54(3)(ii) of the CGST Act does not proscribe/forbid the grant of refund where the input and the output are the same and that clause (ii) of proviso to sub-section (3) of Section 54 of the CGST Act does not contemplate comparing rate of tax on the principal input with the rate of tax chargeable on the principal output supply; further, there is neither any reason nor any scope to further confine the refund of unutilised ITC only to cases where the rate on main input is higher than the rate of tax on the principal output. 16. A perusal of the impugned orders will indicate that respondent has erroneously placed reliance upon Para 3.2 of Circular No. 135/05/2020-GST dated 31.03.2020 though the same has no application in the present case as the said Circular applies only to scenarios/situations where the ITC is accumulated on account of different rates being applicable at different points of time and merely seeks to address an issue where the ITC is accumulated on account of different rates being applicable at different points of time as ....