TaxTMI 
TaxTMI 
2026 (9) TMI 882
X X X X Extracts X X X X
X X X X Extracts X X X X
....h/2025 (pertaining to APL/43/KLK/2026) and 291/CGST/Kol-North/2025 (pertaining to APL/44/KLK/2026) both dated 09.05.2025 passed by the Additional Commissioner (Appeals), CGST & CX, Kolkata Appeals I Commissionerate (in short 'the first Appellate Authority'). The said appeals have been filed before the first Appellate Authority by the present respondent i.e., M/s HP Cotton Casuals Private Limited under sub-section (1) of Section 107 of the CGST Act against the Order-in-Original bearing Ref No. ZD190924014884Y dated 10.09.2024 (pertaining to APL/43/KLK/2026) and ZD1908240567305 dated 28.08.2024 (pertaining to APL/44/KLK/2026) passed by the Assistant Commissioner of CGST and Central Excise, BBD Bag I Division, Kolkata North Commissionerate. 3. The respondent i.e., M/s HP Cotton Casuals Private Limited (19AABCH9855N1ZR) situated at 7th Floor, 3A, Ashoka House, Hare Street, Dalhousie, Kolkata - 700001 is engaged in the business of manufacturing wearing apparel by way of bleaching, dyeing, printing, cutting, stitching, branding, labelling and packing of readymade garments and raw cotton cloth, is registered under the CGST/WBGST Act, 2017. The primary input is 'finish than' (fabric) ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ity, filed the present appeals before this Tribunal mainly on the following grounds: 6.1 That the first Appellate Authority accepted the respondent's contention that they are involved in manufacturing activity without verification of any relevant document. The order of the first appellate authority relies solely on the respondent's submission and not on any verified documentary evidence. 6.2 The Revenue further contended that the first Appellate Authority has admitted that both input and output have the same HSN (e.g. garments) but still allows refund citing "value addition". Further, as per para 3.2 of Circular No. 135/05/2020-GST, refund is not admissible where input and output are same goods even if there is value addition which may be other factors than manufacturing. 6.3 The Revenue further contended that the OAA specifically identified three invoices related to capital goods and some invoices related to personal use, are inadmissible under Rule 89(5) of the CGST Rules, 2017. However, the first Appellate Authority has not discussed or disallowed these invoices. Such blanket acceptance has led to erroneous refund. Also, it has rendered the OIAs non-speaking in natu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng entity and a manufacturing entity. The statute nowhere provides that the benefit of refund under Section 54(3)(ii) is available only to a 'manufacturer' as opposed to any other 'registered person'. The respondent further mention/submits that in the present case, the goods in question were purchased from suppliers in semi-finished or raw form. These goods were thereafter subjected to substantial processing, including dyeing, bleaching, cutting, stitching, packing, branding, and labelling, attracting GST @ 12%, 18%, or 28% duty as the case may be (in the relevant period), which is the normal and accepted practice. It is only after this processing that the goods are sold in the market as finished products. With respect to the allegation by the Revenue that the respondent is not a manufacturer, the respondent submitted Trade Licence to show his bona fide which categorically describes and records the respondent's business as that of a 'manufacturer'. In support, the respondent also submitted that they are claiming refund under inverted duty structure since 2021-22. Their claim for refund was never disallowed on the basis of the fact whether they are a trad....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... inputs used in the course of manufacture are taxed at a rate higher than the output, refund cannot be denied merely because one particular input (or, as in the present case, the broad HSN classification of input and output) happens to coincide. The Court further held that Rule 89(5) of the CGST Rules already provides the statutory mechanism for computing such refund, and that an executive Circular cannot be read so as to override or restrict the plain terms of the statute. Applying the ratio of the above judgment to the facts of the present case, the respondent submits that merely because the input is readymade garments/cloth and the output is finished apparel may carry an overlapping HSN description, refund cannot be denied when it stands demonstrated - as has been demonstrated and accepted by the first Appellate Authority that the accumulation of ITC has arisen on account of various other inputs (dyes, chemicals, printing ink, packing material) taxed at rates up to 18% and 28%, which are used in the course of manufacture of the final product taxed at 5%. The respondent further submits that the finding of the first Appellate Authority allowing the refund, notwithstanding an overl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and is liable to be rejected on this short ground alone. In the connected Order-in-Appeal Nos. 290/CGST/Kol-North/2025 and 291/CGST/Kol-North/2025 both dated 09.05.2025, the first Appellate Authority, at paras 5.6 and 5.7, respectively has specifically and categorically recorded as follows: "From GSTR-2A, GSTR-2B and submitted Annexure-B, I find that the respondent has input of various components, required for manufacturing of wearing apparel, except fur apparel attracting GST at rate of 5% to 28%. Moreover, from their submitted input invoices, which are obviously matched with the invoice details of the relevant GSTR-2A, GSTR-2B and Annexure B, I find that they have used Idacol Tartrazine (HSN 32041982), Jintexol Green II (HSN 32041222), P.G. 5400/71501 (HSN 39011090/10), Acid Slurry (HSN: 34029011) and Parafin Wax Type II (pellets) (HSN: 27122000) etc. at GST rate of 18%; and Cotton Hosiery Fabrics (HSN 6006) at GST rate of 5% for manufacturing of their finished goods wearing apparel, except fur apparel." The above finding demonstrates that the first Appellate Authority did undertake a detailed invoice wise matching exercise between the respondent's submitted Annexure-B and th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rcumstances, it is submitted that the finding of the first Appellate Authority on the issue of zero-rated supply is a considered, reasoned finding grounded in the statutory formula under Rule 89(5). 9.6 With respect to the grounds raised by the Revenue vide para 6.6 above, the respondent submits that the actual quantification of the refund amount for the tax period in question was, and continues to be, undertaken strictly on a period-wise basis, by applying the formula prescribed under Rule 89(5) of the CGST Rules, 2017 to the data of the relevant tax period alone. This is expressly borne out by the OAA's in its impugned orders passed in the connected matter, which records, at Point B(c)(Refund speaking order), that the computation of Net ITC has been "Verified on the basis of data available" and, at Point B(h), that the "Refund calculated on the basis of available data", i.e., period-specific data, applying the relevant statutory formula. It is submitted that the observation of the first Appellate Authority regarding the annual figures of GSTR-3B and GSTR-2A for the Financial Year 2023-24 - recorded, in the connected impugned OIAs, at Para 5.6 and 5.7 - was made only for a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....person." On plain reading of the above provision, it is amply clear that GST is payable on the supply of goods or services or both. It is immaterial whether the respondent is engaged in the trading or manufacturing of goods. The Revenue is contesting on the very basis of manufacturing process without appreciating the provisions mentioned above. Hence, we are of the view that the respondent's eligibility for refund need not be based on the fact whether he is engaged in the trading of goods or manufacturer since the law is very much clear on this aspect. 10.2 With respect to the next contention raised by the Revenue by relying on para 3.2 of the CBIC Circular No.135/05/2020-GST dated 31.03.2020, we are of the view that the provisions of the said circular are applicable for the cases where there is a reduction of GST rate which is evident from the fact that the same is also mentioned in the heading of para 3 of the said circular. For brevity we reproduce the relevant para 3 of the circular as below: "3. Refund of accumulated input tax credit (ITC) on account of reduction in GST Rate 3.1 It has been brought to the notice of the Board that some of the applicants ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssioner of CGST and Central Excise, Sivakasi Division, Thiruthangal, W.P.(MD) Nos. 16757 & 16758 of 2025, decided on 14.07.2026 [2026-VIL-731-MAD; Neutral Citation: 2026:MHC:2893] have clearly held in paras 17 and 18 as below: "17. Thus, it can be seen that the statute does not make any distinction between major and minor components. It clearly provides that if there is a higher rate of tax on output supplies, the party is entitled to claim a refund of unutilised input tax credit. It is now well settled that the taxing statute has to be construed as such. The catena of decisions quoted by the Learned Counsel for the petitioner lay down that the petitioner is entitled to the relief. In this case, though the rate of tax on cotton yarn is the same, with reference to the chemicals used, the packing and other materials used, there is a higher rate of tax on the output goods, and hence the petitioner is entitled to succeed. The necessary formula for the calculation is also prescribed in Rule 89 (5) of the Rules. The circular dated 18/11/2019 has already been declared unconstitutional, and hence no further relief need be granted regarding the same. 18. As a result, ....